Half-Year Financial Report 2020

BASF Group Q2 2020: EBIT before special items declines due to weaker demand as a result of the corona pandemic

Sales of €12.7 billion (minus 12%), mainly due to lower sales volumes resulting from lockdowns
EBIT before special items of €226 million (minus 77%)
Net income of minus €878 million due to a non-cash-effective impairment of the shareholding in Wintershall Dea

On the cover:

The control station at an intermediate products plant at the Ludwigshafen site in Germany, where all information relating to the plant comes together. Using numerous screens, the chemical technician and assistant asset manager control and monitor the highly complex chemical processes. The plant for intermediate products is made up of 16 plant sections and manufactures a broad portfolio of around 50 intermediate products such as amines or diols. BASF customers need these products for applications including the production of coatings for the automotive industry, pharmaceuticals or crop protection products.

Contents	Key Figures: BASF Group H1 2020	3
	Consolidated Interim Management's Report 2020	4
	Significant Events	4
	Results of Operations	5
	Segment sales and EBIT before special items	6
	Net Assets and Financial Position	8
	Net assets	8
	Financial position	8
	Economic Environment and Outlook	10

Information on Q2 2020 11

BASF Group	11
Chemicals	14
Materials	15
Industrial Solutions	16
Surface Technologies	17
Nutrition & Care	18
Agricultural Solutions	19
Other	21
Regions	22

Condensed Consolidated Half-Year Financial Statements 2020	23
Statement of Income	23
Statement of Income and Expense Recognized in Equity	24
Balance Sheet	26
Statement of Cash Flows	28
Statement of Changes in Equity	29
Segment Reporting	30
Notes to the Consolidated Half-Year Financial Statements	31
Responsibility Statement	51

Key Figures BASF Group H1 2020

			Q2			H1
		2020	2019	+/–	2020	2019	+/–
Salesa	Million €	12,680	14,478	(12%)	29,433	30,074	(2%)
Income from operations before depreciation, amortization and special itemsa, c	Million €	1,229	1,885	(35%)	3,808	4,527	(16%)
Income from operations before depreciation and amortization (EBITDA)a, c	Million €	1,070	1,546	(31%)	3,498	4,316	(19%)
EBITDA margin	%	8.4	10.7	−	11.9	14.4	−
Depreciation and amortizationd	Million €	1,011	1,039	(3%)	1,983	2,030	(2%)
Income from operations (EBIT)a, c	Million €	59	507	(88%)	1,515	2,286	(34%)
Special items	Million €	(167)	(488)	66%	(351)	(459)	24%
EBIT before special itemsa, c	Million €	226	995	(77%)	1,866	2,745	(32%)
Income before income taxesa	Million €	(923)	293		277	1,849	(85%)
Income after taxes from continuing operations	Million €	(888)	243		(7)	1,406
Income after taxes from discontinued operationsb	Million €	14	5,686	(100%)	36	5,963	(99%)
Net incomeb	Million €	(878)	5,954		7	7,360	(100%)
Earnings per sharea, b	€	(0.95)	6.48		0.01	8.01	(100%)
Adjusted earnings per sharea, b	€	0.25	0.83	(70%)	1.51	2.47	(39%)
Research and development expenses	Million €	480	518	(7%)	974	1,021	(5%)
Personnel expenses	Million €	2,679	2,865	(6%)	5,505	5,768	(5%)
Number of employees (June 30)		117,563	118,705	(1%)	117,563	118,705	(1%)

Assets (June 30)	Million €	90,369	88,397	2%	90,369	88,397	2%
Investments including acquisitionse	Million €	654	1,060	(38%)	2,790	1,775	57%
Equity ratio (June 30)	%	42.5	45.6	−	42.5	45.6	−
Net debt (June 30)	Million €	20,519	18,872	9%	20,519	18,872	9%
Cash flows from operating activities	Million €	2,242	1,946	15%	1,212	2,319	(48%)
Free cash flow	Million €	1,516	965	57%	(83)	597

a The statement of income for 2019 was adjusted retroactively on presentation of the construction chemicals activities as a discontinued operation from December 21, 2019, onward. For more information, see page 204 onward of the BASF Report 2019, Note 1.4

b In the second half of 2019, the gain on the disposal of the oil and gas business was adjusted retroactively as of May 1, 2019.

c The 2019 figures have been restated to reflect the reclassification of income from non-integral companies accounted for using the equity method to net income from shareholdings. For more information, see Note 1 on page 31

d Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)

e Additions to property, plant and equipment and intangible assets

Significant Events

Consolidated Interim Management's Report 2020 Significant Events

As part of the implementation of BASF's corporate strategy, the operating divisions, cross-functional service units, the regions and a lean Corporate Center have formed the cornerstones of the new BASF organization since January 1, 2020. This organizational realignment has created the conditions for greater customer proximity, increased competitiveness and profitable growth.

Some of the investments accounted for using the equity method are not an integral part of the BASF Group. To increase reporting transparency, these have been classified as purely financial investments since the first quarter of 2020 and reported separately from the shareholdings that are integral to the main business activities of the BASF Group. Since then, income from non-integral companies accounted for using the equity method has no longer been presented in the BASF Group's EBIT and EBIT before special items, but under net income from shareholdings. The statement of income for 2019 has been restated accordingly.

On January 31, 2020, BASF closed the acquisition of Solvay's integrated polyamide business, which was announced in September 2017. The acquisition broadens BASF's polyamide capabilities with innovative and well-known products such as Technyl® and enhances access to growth markets in Asia as well as in North and South America. Through the backward integration into the key raw material adiponitrile (ADN), BASF now has production plants along the entire value chain for polyamide 6.6. The transaction includes production sites in Germany, France, China, India, South Korea, Brazil and Mexico; research and development centers and technical consultation centers; and shares in Butachimie SNC, a joint operation with Invista to produce ADN and hexamethylenediamine (HMD), and in Alsachimie S.A.S., a joint operation between BASF and Domo Chemicals to produce adipic acid. BASF acquired the polyamide business for a purchase price of €1.3 billion (on a cash and debtfree basis) and integrated it into the Performance Materials and Monomers divisions within the Materials segment.

As expected, the economic effects of the corona pandemic had a much stronger impact in the second quarter of 2020 than in the previous quarter. It has affected our customer industries to varying degrees. BASF was particularly negatively impacted by the collapse in demand from the automotive industry, while demand from the detergent and cleaner industry and the food industry was stable. We were able to continue production at all important sites worldwide. We are responding to the situation with a high level of flexibility in resource steering and allocation. Our priority is the health and safety of our employees, as well as the reliable supply of our customers.

BASF is involved in the fight against the spread of the coronavirus with numerous initiatives and contributions as part of the "Helping Hands" aid campaign. These include donations of hand sanitizer and protective face masks, as well as supporting academic research groups in their search for a suitable active ingredient against the virus. The related expenses are recorded as special items under Other.

On May 28, 2020, BASF successfully placed bonds with a total volume of €2 billion on the capital market. The first tranche has an issue volume of €1 billion, a term of three years and an annual coupon of 0.101% and will be used for general corporate financing purposes. With the second tranche, BASF issued its first green bond. This has a term of seven years, a volume of €1 billion and an annual coupon of 0.25%. The green bond is earmarked for financing dedicated products and projects that contribute to sustainable development. BASF was able to secure attractive conditions thanks to its solid financial structure and its leading sustainability position.

On June 15, 2020, BASF announced that preparations and construction of BASF's battery materials plants in Europe are prog ressing as planned. Construction of a precursor plant for cathode active materials began in Harjavalta, Finland. In addition, construction permits were secured to begin building the new plant for cathode active materials in Schwarzheide, Germany. Despite the ongoing corona pandemic, the multi-step investment project remains on schedule for startup in 2022. With it, BASF will provide a reliable and sustainable local supply to cell producers and automotive manufacturers in Europe.

As planned, Dr. Jürgen Hambrecht resigned as Chairman and left the Supervisory Board on conclusion of the Annual Shareholders' Meeting on June 18, 2020. The Supervisory Board elected Dr. Kurt Bock as the new chairman of the Supervisory Board of BASF SE following his election to the Supervisory Board of BASF SE by the Annual Shareholders' Meeting as a shareholder representative. Bock's term runs until the end of the Annual Shareholders' Meeting in 2024.

On July 10, 2020, BASF provided advance notice that EBIT before special items was above market expectations at €226 million. At the same time, net income (minus €878 million) was considerably below analyst estimates and the figure for the prior-year quarter (€5,954 million) due to a non-cash-effective impairment of the shareholding in Wintershall Dea.

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Results of Operations

Sales declined by €641 million compared with the first half of 2019 to €29,433 million. The decrease was mainly attributable to lower volumes in the Materials, Surface Technologies and Industrial Solutions segments and in Other. Higher sales volumes in the Agricultural Solutions, Nutrition & Care and Chemicals segments were unable to compensate for this. Sales were lifted by portfolio effects, especially from the polyamide business acquired from Solvay in the Materials segment. A slightly higher price level owing to strong growth in precious metal prices in the Surface Technologies segment also had a positive impact on sales. This more than offset lower prices in almost all other segments.

Factors influencing BASF Group sales in H1 2020

Volumes	(4%)
Prices	1%
Portfolio	1%
Currencies	0%
Sales	(2%)

Compared with the first half of 2019, income from operations (EBIT) before special items1 declined by €879 million to €1,866 million. This was primarily due to significantly lower contributions from the Materials, Chemicals and Surface Technologies segments. EBIT before special items also declined considerably in the Industrial Solutions segment. By contrast, the Nutrition & Care segment considerably increased EBIT before special items, while the Agricultural Solutions segment posted slight growth. EBIT before special items improved considerably in Other.

Special items of minus €351 million arose in the first half of 2020, compared with minus €459 million in the prior-year period. These primarily related to expenses in connection with the carve-out of the global pigments business and to integration expenses, mainly for the polyamide business acquired from Solvay. Expenses arising from the "Helping Hands" aid campaign were also recognized as special items. In the prior-year period, higher expenses arose from restructuring measures in connection with our excellence program, from the impairment of a natural gas-based investment on the U.S. Gulf Coast, and from the integration of the businesses acquired from Bayer.

Income from operations (EBIT)2 declined by €771 million compared with the first half of 2019 to €1,515 million. This figure includes income from integral companies accounted for using the equity method, which declined by €99 million to €34 million, mainly due to the scheduled turnarounds at the Verbund site in Nanjing, China.

Compared with the prior-year period, income from operations before depreciation, amortization and special items (EBITDA before special items)3 decreased by €719 million to €3,808 million and EBITDA3 by €818 million to €3,498 million.

At minus €956 million, net income from shareholdings was €912 million below the prior-year figure. This was primarily due to the impairment of €819 million on the shareholding in Wintershall Dea in the second quarter of the current year, mainly as a result of lower oil and gas price forecasts and changed reserve estimates. Excluding the impairment of Wintershall Dea, the earnings contributed by the shareholding, which has been accounted for using the equity method since May 1, 2019, declined to minus €112 million (H1 2019: €26 million). Solenis' earnings contribution improved by €57 million compared with the first half of 2019 to minus €12 million.

H1 EBITDA before special items

Million €
	2020	2019
EBIT	1,515	2,286
– Special items	(351)	(459)
EBIT before special items	1,866	2,745
+ Depreciation and amortizationa	1,929	1,776
+ Impairments and reversals of impairments on property, plant and equipment and intangible assets before special itemsa	13	6
Depreciation, amortization, impairments and reversals of impairments on property, plant and equipment and intangible assets before special items	1,942	1,782
EBITDA before special items		4,527

a Excluding depreciation, amortization, impairments and reversals of impairments attributable to the discontinued construction chemicals business in 2019

H1 EBITDA

Million €
	2020	2019
EBIT	1,515	2,286
+ Depreciation and amortizationa	1,929	1,776
+ Impairments and reversals of impairments on property, plant and equipment and intangible assetsa	54	254
Depreciation, amortization, impairments and reversals of impairments on property, plant and equipment and intangible assets	1,983	2,030
EBITDA	3,498	4,316

a Excluding depreciation, amortization, impairments and reversals of impairments attributable to the discontinued construction chemicals business in 2019

1 For an explanation of this indicator, see page 30 of the BASF Report 2019, Value-Based Management

3 For an explanation of this indicator, see page 49 of the BASF Report 2019, Results of Operations

² The calculation of income from operations (EBIT) is shown in the Statement of Income on page 23 of this half-year financial report

Results of Operations

H1 adjusted earnings per share

Million €
	2020	2019
Income after taxes	29	7,369
– Special itemsa	(1,170)	(459)
+ Amortization, impairments and reversals of impairments on intangible assets	340	321
– Amortization, impairments and reversals of impairments on intangible assets contained in special items	2	−
– Adjustments to income taxes	187	217
– Adjustments to income after taxes from discontinued operations	(56)	5,652
Adjusted income after taxes	1,406	2,280
– Adjusted noncontrolling interests	21	9
Adjusted net income	1,385	2,271
Weighted average number of outstanding shares in thousands	918,479	918,479
Adjusted earnings per share	€ 1.51	2.47

a Special items in the first half of 2020 contained the €819 million impairment of Wintershall Dea, which is included in net income from shareholdings.

The financial result improved by €111 million to minus €282 million. This mainly reflected the €80 million improvement in the other financial result due to higher fair values of derivatives. The interest result improved by €31 million year on year to minus €210 million.

Income before taxes decreased by €1,572 million to €277 million. The tax rate rose to 102.5% due to the non-tax-relevant impairment of Wintershall Dea (H1 2019: 24.0%).

Income after taxes from continuing operations declined by €1,413 million to minus €7 million.

Income after taxes from discontinued operations, which in 2020 comprises the construction chemicals business, amounted to €36 million after €5,963 million in the prior-year period. The high income in 2019 was primarily attributable to the book gain of

€5,684 million on the deconsolidation of Wintershall following the merger of Wintershall and DEA as of May 1, 2019.

Noncontrolling interests rose to €22 million after €9 million in the prior-year period. This was largely due to the turnaround of the steam cracker in Port Arthur, Texas, in the first half of 2019.

Net income decreased by €7,353 million to €7 million.

Earnings per share declined to €0.01 in the first half of 2020, compared with €8.01 in the first half of 2019. Earnings per share adjusted1 for special items and amortization of intangible assets amounted to €1.51 (H1 2019: €2.47).

Segment sales and EBIT before special items

In the Chemicals segment, sales were considerably lower than in the first half of 2019. This was mainly attributable to significantly lower prices in both divisions. In the Petrochemicals division in particular, price levels declined as a result of higher product availability on the market, lower raw materials prices and continued weak demand. Higher sales volumes in the Petrochemicals division had an offsetting effect. We were able to increase volumes of steam cracker products after the scheduled turnarounds of our steam crackers in Port Arthur, Texas, and Antwerp, Belgium, in the prioryear period. EBIT before special items declined considerably in both divisions, but especially in the Petrochemicals division due to lower margins and lower income from our equity-accounted joint venture in Nanjing, China, as a result of scheduled turnarounds. In the Intermediates division, the decrease in EBIT before special items was primarily attributable to lower margins, a decline in sales volumes and higher fixed costs, mainly from the gradual startup of the new acetylene plant in Ludwigshafen, Germany.

Sales in the Materials segment declined considerably compared with the prior-year period. This was mainly due to lower volumes, especially in the Performance Materials division, as a result of weaker demand from all customer industries, but especially from the automotive industry. Lower prices, particularly for isocyanates and polyamides in the Monomers division, also contributed to the sales decrease. Portfolio effects from the acquisition of the integrated polyamide business from Solvay had an offsetting impact in both divisions. EBIT before special items declined considerably in both divisions, but especially in the Monomers division. This was primarily the result of lower isocyanate margins. In the Performance Materials division, the decrease in EBIT before special items was largely due to the development of sales volumes.

1 For an explanation of this indicator, see page 50 of the BASF Report 2019, Results of Operations

Results of Operations

Sales in the Industrial Solutions segment were considerably below the level of the first half of 2019. This was primarily the result of lower sales volumes in both divisions. A lower price level due to lower raw materials prices, especially in the Dispersions & Pigments division, also contributed to the sales decrease. Sales were likewise reduced by the transfer of BASF's paper and water chemicals business, which was previously reported under the Performance Chemicals division, to the Solenis group as of January 31, 2019. EBIT before special items declined considerably compared with the prior-year period. This was largely attributable to the considerable earnings decrease in the Performance Chemicals division, mainly from the development of sales volumes and the transfer of BASF's paper and water chemicals business to the Solenis group. EBIT before special items in the Dispersions & Pigments division declined slightly due to lower volumes.

We considerably increased sales in the Surface Technologies segment, mainly as a result of higher precious metal prices in the Catalysts division. Sales development was also positively impacted by currency effects in the Catalysts division. Lower sales volumes due to weak demand from the automotive industry, especially in the Coatings division, had an offsetting effect. EBIT before special items in both divisions was considerably below the prior-year level due to the development of sales volumes, especially in the Coatings division.

We slightly increased sales in the Nutrition & Care segment. This was primarily due to significantly higher sales volumes in the Nutrition & Health division, especially in the aroma ingredients, pharmaceutical and human nutrition businesses. Volumes rose slightly in the Care Chemicals division. Offsetting factors were a lower price level in the Care Chemicals division as a result of lower raw materials prices and negative currency effects in both divisions. EBIT before special items improved considerably due to a significantly higher contribution from the Nutrition & Health division. This was mainly driven by higher margins on the back of volumes growth. In the Care Chemicals division, EBIT before special items was slightly below the level of the first half of 2019, largely due to higher fixed costs, primarily as a result of a one-off contractual payment in the prioryear period.

The Agricultural Solutions segment recorded a slight improvement in sales compared with the first half of 2019. This was due to higher volumes, especially in North and South America. By contrast, sales were dampened by negative currency effects, particularly in the region South America, Africa, Middle East. Prices were on a level with the prior-year period. We slightly increased EBIT before special items. This was mainly driven by higher sales and lower fixed costs.

Sales in Other declined considerably compared with the prior-year period. This primarily reflected the decrease in commodity trading and the remaining activities of the paper and water chemicals business. EBIT before special items was considerably above the figure for the first half of 2019. This was largely attributable to valuation effects for our long-term incentive program. H1 EBIT before special items

H1 sales
Million €, relative change
	2020	4,141	(12%)
Chemicals	2019	4,728
Materials	2020	5,017	(15%)
	2019	5,892
Industrial Solutions	2020	3,917	(9%)
	2019	4,327
Surface Technologies	2020	7,427	20%
	2019	6,183
2020 Nutrition & Care 2019 2020 2019		3,137	3%
	3,056
Agricultural Solutions		4,585	3%
		4,445
Other	2020	1,209	(16%)
	2019	1,443

Million €, absolute change
Chemicals	2020	172	(253)
	2019	425
Materials	2020	129	(528)
	2019	657
Industrial Solutions	2020	436	(71)
	2019	507
Surface Technologies	2020	69	(211)
	2019	280
Nutrition & Care	2020	510	68
	2019	442
Agricultural Solutions	2020	929	68
	2019	861
Other	2020	(379)	48
	2019	(427)

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Net Assets and Financial Position

Net assets

Total assets rose from €86,950 million as of the 2019 year-end to €90,369 million. This was primarily attributable to the increase in current assets.

Noncurrent assets declined by €804 million. The main driver was the €1,265 million decrease in investments accounted for using the equity method to €13,743 million, largely owing to the impairment of the shareholding in Wintershall Dea. This was partially offset by the increase in fixed assets, especially intangible assets, mainly as a result of the integration of the polyamide business acquired from Solvay.

Current assets rose by €4,223 million to €35,213 million, primarily due to higher cash and cash equivalents. Seasonal growth in trade accounts receivable and higher other receivables also contributed to the increase. The decline in inventories had an offsetting effect.

Financial position

Equity declined by €3,969 million compared with December 31, 2019, to €38,381 million, mainly as a result of the dividend payments made in the second quarter of 2020. The equity ratio decreased from 48.7% to 42.5%.

Noncurrent liabilities rose by €2,313 million compared with the 2019 year-end to €30,309 million, primarily due to higher financial indebtedness. This increase was mainly driven by the issue of two eurobonds in the amount of €1 billion each, as well as new bank loans taken out for a total of approximately €800 million. By contrast, the reclassification of a eurobond with a carrying amount of around €1 billion to current financial indebtedness in the first quarter of the current year had an offsetting effect. Tax provisions, deferred taxes, and provisions for pensions and similar obligations also increased. The €141 million increase in other liabilities was largely attributable to higher lease liabilities.

Current liabilities rose by €5,075 million compared with the 2019 year-end to €21,679 million, primarily as a result of higher current financial indebtedness. This was mainly due to the €5.2 billion increase in commercial paper at BASF SE, as well as the abovementioned reclassification of a bond with a carrying amount of €1 billion. The repayment of a €300 million bond had an offsetting effect. Trade accounts payable declined by €1,267 million.

Net debt1 rose by €5,013 million compared with December 31, 2019, to €20,519 million. This was mainly due to the significant increase in financial indebtedness, which rose by €7,704 million to €26,081 million. Higher cash and cash equivalents had an offsetting effect.

Net debt

Million €
		June 30, 2020 Dec. 31, 2019
Noncurrent financial indebtedness	16,664	15,015
+ Current financial indebtedness	9,417	3,362
Financial indebtedness	26,081	18,377
– Marketable securities	350	444
– Cash and cash equivalents	5,212	2,427
Net debt	20,519	15,506

Cash flows from operating activities amounted to €1,212 million in the first half of 2020, €1,107 million below the figure for the prior-year period. The decrease was primarily attributable to the €7,353 million decline in net income. This in turn was due among other factors to the €819 million impairment of the shareholding in Wintershall Dea and the likewise non-cash-effective gain of €5,684 million on the deconsolidation of Wintershall in the previous year, both of which are included in miscellaneous items. The €906 million increase in cash tied up in net working capital also contributed to the decline in operating cash flows. This was largely the result of a stronger reduction in trade accounts payable compared with the previous year. Higher precious metal trading positions due to growth in market prices and the fair values of derivatives also increased the level of cash tied up. The main offsetting effect was the cash released from the reduction in inventories.

Cash flows from investing activities also declined significantly to minus €2,525 million, after €452 million in the first half of 2019. The €427 million decrease in payments made for property, plant and equipment and intangible assets was more than offset by net payments made for acquisitions and divestitures. This related mainly to the purchase price of €1,308 million paid in the first half of 2020 for the polyamide business acquired from Solvay. In the previous year, net payments received from acquisitions and divestitures led to a cash inflow of €2,292 million, mainly from the merger of Wintershall and DEA on May 1, 2019.

Cash flows from financing activities amounted to €4,667 million, compared with minus €3,227 million in the prior-year period. This primarily reflected net additions of €7,799 million to financial and similar liabilities in the current year. As well as issuing two bonds in the amount of €1 billion each, we increased commercial paper by €5.2 billion. In the prior-year period, repayments exceeded additions to financial indebtedness by €214 million. Dividends paid in the first half of 2020 led to a cash outflow of €3,136 million, after €3,014 million in the prior-year period.

1 For an explanation of this indicator, see page 55 of the BASF Report 2019, Financial Position

Net Assets and Financial Position

Free cash flow1 in the first half of 2020 was minus €83 million, €680 million below the prior-year figure.

H1 free cash flow

Million €
	2020	2019
Cash flows from operating activities	1,212	2,319
– Payments made for property, plant and equipment and intangible assets	1,295	1,722
Free cash flow	(83)	597

BASF enjoys good credit ratings, especially compared with competitors in the chemical industry. Standard & Poor's have rated BASF "A/A-1/CreditWatch negative" since March 25, 2020. On June 25, 2020, Moody's adjusted its rating for BASF from "A2/P-1/ review for downgrade" to "A3/P-2/outlook stable." The reasons cited for these changes included the economic impact of the corona pandemic and the related uncertainty.

Economic Environment and Outlook

Economic developments in the first half of 2020 were significantly impacted by the corona pandemic. The sharp drop in economic activity in China in January and February was followed by similar declines in almost all countries worldwide from March onward due to government-ordered or voluntary closures of production and sales sites and many other restrictions. Global gross domestic product is expected to have fallen by around 6% year on year in the first half of 2020.

The economic downturn has impacted our customer industries to varying degrees. Although demand from the detergent and cleaner industry and the food industry remained stable, production here was also affected by restrictions. Much higher supply and demand-related losses were seen in particular by the consumer durables, energy and resources, and construction industries. The automotive industry was particularly strongly affected: Globally, production fell by around one-third in the first half of 2020, although China, the world's largest automotive market, was already recording year-on-year growth of 10% in the second quarter after a decrease of 46% in the first quarter.

Based on preliminary, partly estimated data, global industrial production contracted by around 8% in the first half of 2020. Industrial production in China sank by nearly 10% in the first quarter of 2020 but returned to growth of almost 5% in the second quarter. The rest of the world saw what are expected to be double-digit decreases overall in the first half of 2020.

Global chemical production contracted by around 4% year on year in the first half of the year. In China, this fell by almost 8% in the first quarter of 2020. In the second quarter, by contrast, it was again nearly 4% above the prior-year level. The recovery in China began as early as March, while the United States and the E.U. first saw signs of a stabilization at a low level in May. Chemical production in the United States declined by around 7% overall in the second quarter compared with the prior-year period. The E.U. recorded a total decrease of 11% in April and May. In Japan, chemical production declined by a total of 13% in April and May compared with the same months in the previous year.

The price of oil averaged \$40 per barrel (Brent crude) in the first half of 2020, below the average for the prior-year period (\$66 per barrel). The oil price fluctuated sharply due to the collapse in demand and the initial failure of OPEC+ negotiations on production cuts.

For the second half of 2020, we anticipate a high level of uncertainty due to the ongoing corona pandemic.

Some of the risks relating to short-term demand and margin development presented in the BASF Report 2019 have materialized as a result of the corona pandemic. Due to the high level of uncertainty at present, the development of demand and margins is exposed to increased risk in the second half of the year.

The corona pandemic also poses a significant risk for long-term macroeconomic developments. In the absence of a recovery in the near future, we see an increased impairment risk for some items of property, plant and equipment and intangible assets. We do not yet have sufficient visibility to predict the long-term economic effects of the corona crisis; we are analyzing market developments for potential needs for impairment. Above and beyond this, we do not see any material new or increased risks as a result of the crisis, such as supply chain disruption risks or the risk of default on receivables.

According to our assessment, there continue to be no individual risks that pose a threat to the continued existence of the BASF Group. The same applies to the sum of individual risks.

For the third quarter of 2020, we currently do not expect EBIT before special items to improve significantly compared with the second quarter of 2020, in part due to the generally lower demand in August and the seasonality of the Agricultural Solutions business.

On April 29, 2020, BASF withdrew its outlook for the 2020 business year as the economic effects of the corona pandemic on our customer industries, especially the automotive industry, cannot be reliably estimated. Given the continued high level of uncertainty surrounding economic developments due to the effects of the pandemic and the low visibility, it is still not possible to make any concrete statements on the development of sales and earnings for the full-year 2020.

We expect to close the divestiture of the construction chemicals business in the third quarter of 2020 and the divestiture of the pigments business in the fourth quarter of 2020, subject to the approval of the relevant competition authorities in each case. We do not see any significant increase in risks for the closing of the transactions as a result of the pandemic.

BASF Group

Information on Q2 2020 BASF Group Q2 sales

Sales declined by €1,798 million compared with the second quarter of 2019 to €12,680 million. The development of sales was mainly attributable to lower sales volumes in the Surface Technologies, Materials and Industrial Solutions segments and in Other. Volumes growth in the Chemicals, Nutrition & Care and Agricultural Solutions segments was unable to compensate for this. Negative currency effects, particularly in the Agricultural Solutions segment, also contributed to the sales decrease. In addition, sales were negatively impacted by a slightly lower price level. Higher prices in the Surface Technologies segment could not completely compensate for the lower price level in Chemicals, Materials, Industrial Solutions, Other and Nutrition & Care. Portfolio effects had an offsetting impact, especially in the Materials segment from the acquisition of Solvay's integrated polyamide business.

Factors influencing BASF Group sales in Q2 2020

Volumes	(11%)
Prices	(1%)
Portfolio	1%
Currencies	(1%)
Sales	(12%)

At €226 million, income from operations (EBIT) before special items1 was down €769 million from the second quarter of 2019. This was primarily the result of significantly lower contributions from the Materials, Surface Technologies and Chemicals segments. EBIT before special items also declined considerably in the Industrial Solutions segment, while the Agricultural Solutions segment posted a decrease of €1 million. By contrast, we considerably increased

Million €, relative change
	2020	1,791	(18%)
Chemicals	2019	2,180
	2020	2,143	(28%)
Materials	2019	2,961
	2020	1,819	(15%)
Industrial Solutions	2019	2,141
	2020	3,099	(2%)
Surface Technologies	2019	3,161
	2020	1,555	4%
Nutrition & Care	2019	1,495
	2020	1,766	(2%)
Agricultural Solutions	2019	1,796
	2020	507	(32%)
Other	2019	744

Q2 EBIT before special items

Million €, absolute change
	2020	(2)	(121)
Chemicals	2019	119
	2020	(80)	(414)
Materials	2019	334
	2020	163	(80)
Industrial Solutions	2019	243
	2020	(151)	(280)
Surface Technologies	2019	129
	2020	256	36
Nutrition & Care	2019	220
	2020	120	(1)
Agricultural Solutions	2019	121
	2020	(80)	91
Other	2019	(171)

EBIT before special items in Other and in the Nutrition & Care segment.

Special items in EBIT totaled minus €167 million in the second quarter of 2020, compared with minus €488 million in the prioryear quarter. These largely related to expenses for restructuring measures and measures as part of the "Helping Hands" aid campaign. Further expenses arose in connection with the carve-out of the global pigments business. The higher expenses in the prioryear period were mainly attributable to restructuring measures in connection with our excellence program, the impairment of a natural gas-based investment on the U.S. Gulf Coast, and the integration of the businesses acquired from Bayer.

EBIT2 declined by €448 million to €59 million. This figure includes income from integral companies accounted for using the equity method, which declined to €28 million (Q2 2019: €56 million).

wird aktualisiert

¹ For an explanation of this indicator, see page 30 of the BASF Report 2019, Value-Based Management

² The calculation of income from operations (EBIT) is shown in the Statement of Income on page 23 of this half-year financial report

Q2 EBITDA before special items

Million €
	2020	2019
EBIT	59	507
– Special items	(167)	(488)
EBIT before special items	226	995
+ Depreciation and amortizationa	995	894
+ Impairments and reversals of impairments on property, plant and equipment and intangible assets before special itemsa	8	(4)
Depreciation, amortization, impairments and reversals of impairments on property, plant and equipment and intangible assets before special items	1,003	890
EBITDA before special items	1,229	1,885

a Excluding depreciation, amortization, impairments and reversals of impairments attributable to the discontinued construction chemicals business in 2019

Q2 EBITDA

Million €
	2020	2019
EBIT	59	507
+ Depreciation and amortizationa	969	894
+ Impairments and reversals of impairments on property, plant and equipment and intangible assetsa	42	145
Depreciation, amortization, impairments and reversals of impairments on property, plant and equipment and intangible assets	1,011	1,039
EBITDA	1,070	1,546

a Excluding depreciation, amortization, impairments and reversals of impairments attributable to the discontinued construction chemicals business in 2019

Income from operations before depreciation, amortization and special items (EBITDA before special items)1 decreased by €656 million to €1,229 million and EBITDA1 declined by €476 million to €1,070 million in the same period.

Net income from shareholdings declined by €784 million to minus €788 million. This was primarily due to the €819 million impairment of the shareholding in Wintershall Dea as a result of lower oil and gas price forecasts and changed reserve estimates. Excluding the impairment of Wintershall Dea, the earnings contributed by the shareholding, which has been accounted for using the equity method since May 1, 2019, rose by €27 million year on year to €53 million. Solenis' earnings contribution improved by €29 million to minus €11 million.

The financial result improved by €16 million to minus €194 million. This mainly reflected the improved interest result. The other financial result was only slightly above the prior-year figure.

Income before income taxes decreased by €1,216 million to minus €923 million.

Income after taxes from continuing operations declined to minus €888 million, compared with €243 million in the prior-year quarter.

Income after taxes from discontinued operations, which in 2020 comprises the construction chemicals business, amounted to €14 million after €5,686 million in the second quarter of 2019. This is primarily attributable to the book gain of €5,684 million on the deconsolidation of Wintershall following the merger of Wintershall and DEA as of May 1, 2019, which was included in the figure for the prior-year quarter.

Noncontrolling interests amounted to minus €4 million after €25 million in the prior-year period. In the prior-year period, income arose in connection with the turnaround of the steam cracker in Port Arthur, Texas.

Q2 adjusted earnings per share

Million €
	2020	2019
Income after taxes	(874)	5,929
– Special itemsa	(986)	(488)
+ Amortization, impairments and reversals of impairments on intangible assets	169	160
– Amortization, impairments and reversals of impairments on intangible assets contained in special items	(24)	−
– Adjustments to income taxes	113	179
– Adjustments to income after taxes from discontinued operations	(37)	5,662
Adjusted income after taxes	229	736
– Adjusted noncontrolling interests	4	(23)
Adjusted net income	225	759
Weighted average number of outstanding shares in thousands	918,479	918,479
Adjusted earnings per share €	0.25	0.83

a Special items in the second quarter of 2020 contained the €819 million impairment of Wintershall Dea, which is included in net income from shareholdings.

1 For an explanation of this indicator, see page 49 of the BASF Report 2019, Results of Operations

BASF Group

Net income decreased to minus €878 million, compared with €5,954 million in the second quarter of 2019.

As a result, earnings per share declined to minus €0.95 in the second quarter of 2020, after €6.48 in the prior-year period. Earnings per share adjusted1 for special items and amortization of intangible assets amounted to €0.25 (Q2 2019: €0.83).

In the second quarter of 2020, we improved cash flows from operating activities by €296 million year on year to €2,242 million. The increase was primarily due to cash released from net working capital, which rose by €336 million. The main contributing factors here were the reduction in trade accounts receivable and inventories, and higher tax liabilities. This was partially offset by a stronger decline in trade accounts payable compared with the prior-year quarter. Cash flows from operating activities were also reduced by the considerable decline in net income. This included a non-casheffective gain of €5,684 million on the deconsolidation of Wintershall in the second quarter of 2019 and an impairment of €819 million on the shareholding in Wintershall Dea in the second quarter of 2020.

Cash flows from investing activities amounted to minus €705 million, well below the figure for the prior-year quarter (€1,289 million). The decline is primarily attributable to the net payments received from acquisitions and divestitures in the prior-year quarter, which had included payments received from the merger of Wintershall and DEA on May 1, 2019. At €726 million, payments made for property, plant and equipment and intangible assets were significantly below the figure for the second quarter of 2019 (€981 million).

Cash flows from financing activities amounted to €373 million in the second quarter of 2020, compared with minus €3,847 million in the prior-year quarter. Net additions of €3,470 million to financial and similar liabilities exceeded the dividend payments of €3,100 million. In the prior-year quarter, dividend payments amounted to around €3.0 billion, and repayments exceeded additions to financial and similar liabilities by €834 million.

Free cash flow2 amounted to €1,516 million in the second quarter of 2020, an improvement of €551 million compared with the prioryear quarter.

Q2 free cash flow

Million €
	2020	2019
Cash flows from operating activities	2,242	1,946
– Payments made for property, plant and equipment and intangible assets	726	981
Free cash flow	1,516	965

1 For an explanation of this indicator, see page 50 of the BASF Report 2019, Results of Operations

2 For an explanation of this indicator, see page 57 of the BASF Report 2019, Financial Position

Chemicals

Q2 2020

In the Chemicals segment, sales1 declined considerably compared with the second quarter of 2019 in both divisions, but especially in the Petrochemicals division.

Factors influencing sales in Q2 2020 – Chemicals

		Chemicals Petrochemicals	Intermediates
Volumes	7%	13%	(6%)
Prices	(25%)	(33%)	(8%)
Portfolio	0%	0%	0%
Currencies	0%	0%	0%
Sales	(18%)	(20%)	(14%)

The sales decrease was primarily the result of significantly lower prices in both divisions. In the Petrochemicals division, the decrease in prices was largely due to higher product availability on the market and lower raw materials prices. The lower prices in the Intermediates division mainly reflected continued weak demand.

By contrast, we were able to increase sales volumes in the Chemicals segment thanks to the positive development of volumes in the Petrochemicals division. Following the scheduled turnarounds of our steam crackers in Port Arthur, Texas, and Antwerp, Belgium, in the second quarter of 2019, we were able to significantly increase volumes of steam cracker products in the second quarter of 2020 and compensate for the decrease in sales volumes in the rest of the portfolio as a result of the corona pandemic. Sales were reduced by lower sales volumes in the Intermediates division due to the effects of the corona pandemic, especially in the acids and polyalcohols business and in the butanediol and derivatives business.

Segment data – Chemicals

Million €
	Q2				H1
	2020	2019	+/–	2020	2019	+/–
Sales to third parties	1,791	2,180	(18%)	4,141	4,728	(12%)
of which Petrochemicals	1,173	1,463	(20%)	2,812	3,266	(14%)
Intermediates	618	717	(14%)	1,329	1,462	(9%)
Income from operations before depreciation, amortization and special items	216	302	(28%)	607	791	(23%)
Income from operations before depreciation and amortization (EBITDA)	210	286	(27%)	596	771	(23%)
Depreciation and amortizationa	228	323	(29%)	444	506	(12%)
Income from operations (EBIT)	(18)	(37)	51%	152	265	(43%)
Special items	(16)	(156)	90%	(20)	(160)	88%
EBIT before special items	(2)	119		172	425	(60%)
Assets (June 30)	8,642	9,058	(5%)	8,642	9,058	(5%)
Investments including acquisitionsb	153	337	(55%)	513	572	(10%)
Research and development expenses	24	26	(8%)	49	53	(8%)

a Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)

b Additions to property, plant and equipment and intangible assets

Income from operations (EBIT) before special items was considerably below the level of the prior-year quarter. The considerable decrease affected both divisions, but in particular the Intermediates division. Here, the decline in earnings was primarily due to lower volumes and higher fixed costs, primarily as a result of the gradual startup of the new acetylene plant in Ludwigshafen, Germany. Higher margins on the back of lower raw materials prices had an offsetting effect and led overall to positive EBIT before special items in the Intermediates division.

EBIT before special items declined in the Petrochemicals division, mainly due to scheduled turnarounds in Nanjing, China, and lower margins. In addition, an unscheduled turnaround occurred in June at our steam cracker in Port Arthur, Texas.

1 For sales, "slight" represents a change of 1–5%, while "considerable" applies to changes of 6% and higher. "At prior-year level" indicates no change (+/–0%). For earnings, "slight" means a change of 1–10%, while "considerable" is used for changes of 11% and higher. "At prior-year level" indicates no change (+/–0%).

Key Figures Consolidated Interim Management's Report 2020 Information on Q2 2020 Condensed Consolidated Half-Year Financial Statements 2020

Materials

Q2 2020

Segment data – Materials

In the Materials segment, sales in both divisions were considerably below the second quarter of 2019.

Factors influencing sales in Q2 2020 – Materials

	Materials	Performance Materials	Monomers
Volumes	(23%)	(31%)	(14%)
Prices	(8%)	(4%)	(13%)
Portfolio	4%	4%	5%
Currencies	(1%)	0%	(1%)
Sales	(28%)	(31%)	(23%)

Sales development was primarily driven by significantly lower volumes in both divisions due to the effects of the corona pandemic, especially in the Performance Materials division. The decrease in sales volumes here was largely attributable to much weaker demand from the automotive industry. Volumes also declined in the consumer goods and construction industries. In the Monomers division, volumes declined for isocyanates in particular.

Significantly lower price levels for isocyanates and polyamides in the Monomers division also contributed to the sales decrease. Prices were slightly lower in the Performance Materials division.

Sales in both divisions were positively impacted by portfolio effects from the acquisition of Solvay's integrated polyamide business.

Currency effects had a negative impact on sales.

Million €
	Q2			H1
	2020	2019	+/–	2020	2019	+/–
Sales to third parties	2,143	2,961	(28%)	5,017	5,892	(15%)
of which Performance Materials	1,071	1,562	(31%)	2,602	3,109	(16%)
Monomers	1,072	1,399	(23%)	2,415	2,783	(13%)
Income from operations before depreciation, amortization and special items	147	506	(71%)	562	999	(44%)
Income from operations before depreciation and amortization (EBITDA)	134	495	(73%)	459	986	(53%)
Depreciation and amortizationa	236	176	34%	442	346	28%
Income from operations (EBIT)	(102)	319		17	640	(97%)
Special items	(22)	(15)	(47%)	(112)	(17)
EBIT before special items	(80)	334		129	657	(80%)
Assets (June 30)	9,831	9,174	7%	9,831	9,174	7%
Investments including acquisitionsb	87	187	(53%)	1,506	321	369%
Research and development expenses	41	47	(13%)	86	95	(9%)

a Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)

b Additions to property, plant and equipment and intangible assets

Compared with the prior-year quarter, income from operations (EBIT) before special items declined considerably in both divisions, especially in the Monomers division. This was primarily due to lower isocyanate margins on the back of weak demand. EBIT before special items in the Performance Materials division also declined considerably, mainly as a result of lower volumes.

Industrial Solutions

Q2 2020

Segment data – Industrial Solutions

In the Industrial Solutions segment, sales in both divisions declined considerably compared with the prior-year quarter.

Factors influencing sales in Q2 2020 – Industrial Solutions

	Industrial Solutions	Dispersions & Pigments	Performance Chemicals
Volumes	(11%)	(7%)	(17%)
Prices	(4%)	(5%)	(2%)
Portfolio	0%	0%	(1%)
Currencies	0%	0%	0%
Sales	(15%)	(12%)	(20%)

The decrease was primarily due to significantly lower volumes in both divisions. The development of sales volumes in the Performance Chemicals division was negatively impacted by weak demand, especially in the fuel and lubricant solutions and oilfield chemicals businesses. In the Dispersions & Pigments division, higher semiconductor volumes in the electronic materials business were unable to offset lower volumes in all other business areas.

Slightly lower prices in both divisions, but especially in the Dispersions & Pigments division, also contributed to the sales decrease. Price levels declined, mainly due to lower raw materials prices.

Portfolio effects in the Performance Chemicals division from the divestiture of inge GmbH as of December 31, 2019, had a slightly negative impact on sales.

Million €
	Q2			H1
	2020	2019	+/–	2020	2019	+/–
Sales to third parties	1,819	2,141	(15%)	3,917	4,327	(9%)
of which Dispersions & Pigments	1,173	1,336	(12%)	2,474	2,656	(7%)
Performance Chemicals	646	805	(20%)	1,443	1,671	(14%)
Income from operations before depreciation, amortization and special items	280	342	(18%)	623	720	(13%)
Income from operations before depreciation and amortization (EBITDA)	225	329	(32%)	560	853	(34%)
Depreciation and amortizationa	92	101	(9%)	187	218	(14%)
Income from operations (EBIT)	133	228	(42%)	373	635	(41%)
Special items	(30)	(15)	(100%)	(63)	128
EBIT before special items	163	243	(33%)	436	507	(14%)
Assets (June 30)	6,983	7,193	(3%)	6,983	7,193	(3%)
Investments including acquisitionsb	68	98	(31%)	135	182	(26%)
Research and development expenses	43	47	(9%)	88	96	(8%)

a Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments) b Additions to property, plant and equipment and intangible assets

Income from operations (EBIT) before special items in both divisions decreased considerably compared with the prior-year quarter. This was mainly driven by the development of volumes. Slightly lower fixed costs had an offsetting effect in both divisions.

Segment data – Surface Technologies

Surface Technologies

Q2 2020

Million €

In the Surface Technologies segment, sales declined slightly due to a considerable sales decrease in the Coatings division. By contrast, we considerably increased sales in the Catalysts division.

Factors influencing sales in Q2 2020 – Surface Technologies

	Surface Technologies	Catalysts	Coatings
Volumes	(26%)	(19%)	(39%)
Prices	24%	33%	1%
Portfolio	0%	0%	0%
Currencies	0%	1%	(3%)
Sales	(2%)	15%	(41%)

The sales development was primarily driven by significantly lower sales volumes in both divisions. This was due to weak demand from the automotive industry due to the effects of the corona pandemic. Lower volumes, especially for mobile emissions catalysts, in precious metal trading and for refining catalysts, reduced sales in the Catalysts division. In the Coatings division, volumes declined in all business areas.

Significantly higher prices overall as a result of higher precious metal prices in the Catalysts division had an offsetting effect. In precious metal trading, sales rose to €1,502 million due to higher prices (Q2 2019: €1,065 million). Prices rose slightly in the Coatings division, mainly in the decorative paints and surface treatments businesses.

Q2				H1
2020	2019	+/–	2020	2019	+/–
3,099	3,161	(2%)	7,427	6,183	20%
2,549	2,222	15%	6,081	4,340	40%
550	939	(41%)	1,346	1,843	(27%)
(34)	240		304	495	(39%)
(44)	235		290	487	(40%)
132	110	20%	249	218	14%
(176)	125		41	269	(85%)
(25)	(4)		(28)	(11)
(151)	129		69	280	(75%)
11,700	11,378	3%	11,700	11,378	3%
137	131	5%	220	228	(4%)
48	52	(8%)	103	102	1%

Income from operations (EBIT) before special items was considerably below the level of the prior-year quarter in both divisions. This was largely driven by the development of sales volumes in both divisions.

Nutrition & Care

Q2 2020

We slightly increased sales in the Nutrition & Care segment compared with the second quarter of 2019. This was driven by considerable sales growth in the Nutrition & Health division, while sales in the Care Chemicals division were on a level with the prior-year quarter.

Factors influencing sales in Q2 2020 – Nutrition & Care

	Nutrition & Care		Care Chemicals Nutrition & Health
Volumes	7%	4%	12%
Prices	(1%)	(2%)	2%
Portfolio	0%	0%	0%
Currencies	(2%)	(2%)	(2%)
Sales	4%	0%	12%

The slight sales increase was primarily due to higher volumes in both divisions. The significant volumes growth in the Nutrition & Health division was mainly attributable to the aroma ingredients, pharmaceutical and human nutrition businesses. Sales volumes rose slightly in the Care Chemicals division. Higher volumes in the home care, industrial and institutional cleaning and industrial formulators business, as well as in the oleo surfactants and alcohols business contributed to sales growth.

Negative currency effects, especially in South America, partially offset this increase.

Segment data – Nutrition & Care

Million €
	Q2			H1
	2020	2019	+/–	2020	2019	+/–
Sales to third parties	1,555	1,495	4%	3,137	3,056	3%
of which Care Chemicals	1,007	1,004	0%	2,095	2,099	0%
Nutrition & Health	548	491	12%	1,042	957	9%
Income from operations before depreciation, amortization and special items	362	318	14%	719	645	11%
Income from operations before depreciation and amortization (EBITDA)	359	306	17%	711	626	14%
Depreciation and amortizationa	104	99	5%	212	295	(28%)
Income from operations (EBIT)	255	207	23%	499	331	51%
Special items	(1)	(13)	92%	(11)	(111)	90%
EBIT before special items	256	220	16%	510	442	15%
Assets (June 30)	6,584	6,386	3%	6,584	6,386	3%
Investments including acquisitionsb	104	110	(5%)	206	209	(1%)
Research and development expenses	37	38	(3%)	74	73	1%

a Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)

b Additions to property, plant and equipment and intangible assets

Sales were also negatively impacted by a slightly lower price level. This was largely attributable to lower prices in the home care, industrial and institutional cleaning and industrial formulators business in the Care Chemicals division. Slightly higher prices in the Nutrition & Health division, mainly driven by the animal nutrition business, could not compensate for this decrease.

We considerably increased income from operations (EBIT) before special items compared with the prior-year quarter thanks to a significantly higher contribution from the Nutrition & Health division. This was primarily due to higher margins resulting from higher volumes and prices. EBIT before special items in the Care Chemicals division declined slightly, mainly from higher fixed costs due to a one-off contractual payment in the prior-year quarter.

Agricultural Solutions

Q2 2020

Sales in the Agricultural Solutions segment were slightly below the level of the second quarter of 2019. This was mainly attributable to negative currency effects, especially in the region South America, Africa, Middle East. Higher volumes in all regions except Europe and higher price levels had a positive impact on sales.

Factors influencing sales in Q2 2020 – Agricultural Solutions

Sales	(2%)
Currencies	(5%)
Portfolio	0%
Prices	1%
Volumes	2%

In Europe, sales declined considerably compared with the prioryear quarter, primarily as a result of lower volumes. This was attributable to lower sales volumes, especially of herbicides and fungicides, mainly due to dry weather conditions in large parts of Europe. Sales were also reduced by negative currency effects, especially in Russia and Turkey. Slightly higher prices had an offsetting effect.

We slightly increased sales in North America compared with the level of the second quarter of 2019. The sales increase was primarily driven by higher volumes, especially of herbicides and fungicides. Sales were dampened by lower prices.

We considerably improved sales in Asia, primarily from higher herbicide volumes in China, India and Australia. Slightly higher prices also had a positive impact on sales. This was partially offset by negative currency effects and portfolio effects.

Segment data – Agricultural Solutions

Million €
		Q2			H1
	2020	2019	+/–	2020	2019	+/–
Sales to third parties	1,766	1,796	(2%)	4,585	4,445	3%
Income from operations before depreciation, amortization and special items	299	298	0%	1,288	1,208	7%
Income from operations before depreciation and amortization (EBITDA)	275	205	34%	1,242	1,148	8%
Depreciation and amortizationa	180	176	2%	360	347	4%
Income from operations (EBIT)	95	29	228%	882	801	10%
Special items	(25)	(92)	73%	(47)	(60)	22%
EBIT before special items	120	121	(1%)	929	861	8%
Assets (June 30)	16,736	17,348	(4%)	16,736	17,348	(4%)
Investments including acquisitionsb	71	148	(52%)	136	116	17%
Research and development expenses	200	205	(2%)	407	398	2%

Sales in the region South America, Africa, Middle East rose considerably. We were able to significantly increase our volumes, particularly in Brazil and Argentina, where we recorded volumes growth in all indications and sectors. A significantly higher price level also contributed to the positive sales development. This more than offset significantly negative currency effects, especially in Brazil and Argentina.

H1 2020 sales by indication and sector

Income from operations (EBIT) before special items was down €1 million from the level of the prior-year quarter. EBIT before special items was negatively impacted by currency effects and an unfavorable product mix. This was almost offset by significantly lower fixed costs.

EBIT included special items for the integration of the businesses acquired from Bayer; these were lower than in the prior-year quarter.

Other

Q2 2020

Financial data – Other

Sales in Other declined considerably compared with the prior-year quarter. This primarily reflected the decrease in commodity trading and in the remaining activities of the paper and water chemicals business.

Income from operations before special items was considerably above the figure for the prior-year quarter.

Million €
		Q2			H1
	2020	2019	+/–	2020	2019	+/–
Sales	507	744	(32%)	1,209	1,443	(16%)
Income from operations before depreciation, amortization and special itemsa	(41)	(121)	66%	(295)	(331)	11%
Income from operations before depreciation and amortization (EBITDA)a	(89)	(310)	71%	(360)	(555)	35%
Depreciation and amortizationb	39	54	(28%)	89	100	(11%)
Income from operations (EBIT)a	(128)	(364)	65%	(449)	(655)	31%
Special itemsa	(48)	(193)	75%	(70)	(228)	69%
EBIT before special itemsa	(80)	(171)	53%	(379)	(427)	11%
of which costs for cross-divisional corporate research	(81)	(99)	18%	(156)	(197)	21%
costs of corporate headquarters	(57)	(66)	14%	(111)	(124)	10%
other businesses	24	48	(50%)	51	85	(40%)
foreign currency results, hedging and other measurement effects	(49)	(12)		3	(38)
miscellaneous income and expenses	83	(42)		(166)	(153)	(8%)
Assets (June 30)c	29,893	27,860	7%	29,893	27,860	7%
Investments including acquisitionsd	34	49	(31%)	74	147	(50%)
Research and development expenses	87	103	(16%)	167	204	(18%)

a The 2019 figures have been restated to reflect the reclassification of income from non-integral companies accounted for using the equity method to net income from shareholdings. For more information, see Note 1 on page 31.

b Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)

c Contains assets of businesses recognized under Other as well as reconciliation to assets of the BASF Group

d Additions to property, plant and equipment and intangible assets

Regions

Q2 2020

Regions

Sales at companies located in Europe declined by 21% compared with the second quarter of 2019. This was largely attributable to lower volumes in almost all segments, but especially in the Materials, Surface Technologies and Industrial Solutions segments. Lower prices, particularly in the Chemicals segment, also contributed to the sales decrease. This could only be partly offset by a higher price level in the Surface Technologies segment. Sales were positively impacted in particular by portfolio effects in the Materials segment attributable to the polyamide business acquired from Solvay. At €24 million, income from operations (EBIT) was down €372 million from the prior-year period. This was due to lower contributions from all segments, but especially from the Materials and Surface Technologies segments.

In North America, sales declined by 10% in euros and 12% in local currency terms. This was mainly the result of lower sales volumes, especially in the Surface Technologies and Materials segments and in Other. Volumes growth, particularly in the Chemicals segment, had an offsetting effect. A higher price level in the Surface Technologies segment due to higher precious metal prices more than offset lower prices in all other segments. Currency effects also had a slightly positive impact on sales. We improved EBIT by €45 million to minus €163 million. This was primarily attributable to significantly higher contributions from the Chemicals, Agricultural Solutions and Nutrition & Care segments.

We were able to increase sales in Asia Pacific by 3% in euros and 4% in local currency terms. This was largely due to higher volumes, especially in the Nutrition & Care and Chemicals segments. Portfolio effects, particularly in the Materials segment from the acquisition of Solvay's integrated polyamide business, and higher prices in the Surface Technologies segment also contributed to sales growth.

Million €
		Sales by location of company			Sales by location of customer			Income from operations by location of companya
Q2	2020	2019	+/–	2020	2019	+/–	2020	2019	+/–
Europe	5,081	6,464	(21%)	4,689	6,024	(22%)	24	396	(94%)
of which Germany	2,149	3,499	(39%)	1,062	1,585	(33%)	(182)	87
North America	3,533	3,936	(10%)	3,477	3,813	(9%)	(163)	(208)	22%
Asia Pacific	3,443	3,341	3%	3,589	3,524	2%	180	305	(41%)
South America, Africa, Middle East	623	737	(15%)	925	1,117	(17%)	18	14	29%
BASF Group	12,680	14,478	(12%)	12,680	14,478	(12%)	59	507	(88%)
H1
Europe	12,601	13,652	(8%)	11,900	12,697	(6%)	705	1,246	(43%)
of which Germany	5,422	7,487	(28%)	2,750	3,188	(14%)	16	493	(97%)
North America	8,779	8,577	2%	8,462	8,357	1%	311	439	(29%)
Asia Pacific	6,738	6,439	5%	7,062	6,844	3%	466	583	(20%)
South America, Africa, Middle East	1,315	1,406	(6%)	2,009	2,176	(8%)	33	18	83%
BASF Group	29,433	30,074	(2%)	29,433	30,074	(2%)	1,515	2,286	(34%)

Negative currency effects in almost all segments and lower prices, especially in the Materials and Chemicals segments, had an offsetting impact. EBIT declined by €125 million to €180 million due to lower contributions from the Materials and Chemicals segments.

Sales in the region South America, Africa, Middle East declined by 15% in euros but rose by 6% in local currency terms. The decrease was primarily due to negative currency effects in all segments. Sales development was also weighed down by lower sales volumes, especially in the Surface Technologies segment. This was partially offset by a higher price level in the Agricultural Solutions, Nutrition & Care, Surface Technologies, Materials and Industrial Solutions segments. Portfolio effects in the Materials segment attributable to the polyamide business acquired from Solvay also had a positive impact on sales. We increased EBIT by €4 million to €18 million, primarily as a result of higher contributions from the Agricultural Solutions, Chemicals and Nutrition & Care segments.

Statement of Income

Condensed Consolidated Half-Year Financial Statements 2020

Statement of Income

Statement of income

Million €		Q2		H1
Explanations in Note	2020	2019	+/–	2020	2019	+/–
Sales revenuea	12,680	14,478	(12%)	29,433	30,074	(2%)
Cost of sales	(9,549)	(10,538)	9%	(21,775)	(21,465)	(1%)
Gross profit on salesa	3,131	3,940	(21%)	7,658	8,609	(11%)
Selling expenses	(1,827)	(1,976)	8%	(3,798)	(3,966)	4%
General administrative expenses	(313)	(348)	10%	(637)	(684)	7%
Research and development expenses	(480)	(518)	7%	(974)	(1,021)	5%
Other operating income [5]	104	148	(30%)	604	707	(15%)
Other operating expenses [5]	(584)	(795)	27%	(1,372)	(1,492)	8%
Income from integral companies accounted for using the equity method	28	56	(50%)	34	133	(74%)
Income from operations (EBIT)a, c	59	507	(88%)	1,515	2,286	(34%)
Income from non-integral companies accounted for using the equity method	(775)	(11)		(941)	(39)
Income from other shareholdings	10	22	(55%)	22	26	(15%)
Expenses from other shareholdings	(23)	(15)	(53%)	(37)	(31)	(19%)
Net income from shareholdingsa, c [7]	(788)	(4)		(956)	(44)
Interest income	37	44	(16%)	83	91	(9%)
Interest expenses	(143)	(165)	13%	(293)	(332)	12%
Interest result	(106)	(121)	12%	(210)	(241)	13%
Other financial income	(38)	8		41	16	156%
Other financial expenses	(50)	(97)	48%	(113)	(168)	33%
Other financial result	(88)	(89)	1%	(72)	(152)	53%
Financial resulta, c [7]	(194)	(210)	8%	(282)	(393)	28%
Income before income taxesa	(923)	293		277	1,849	(85%)
Income taxes [8]	35	(50)		(284)	(443)	36%
Income after taxes from continuing operations	(888)	243		(7)	1,406
Income after taxes from discontinued operationsb	14	5,686	(100%)	36	5,963	(99%)
Income after taxesb	(874)	5,929		29	7,369	(100%)
Noncontrolling interests [9]	(4)	25		(22)	(9)
Net incomeb	(878)	5,954		7	7,360	(100%)
Earnings per share from continuing operations [10] €	(0.97)	0.30		(0.02)	1.54
Earnings per share from discontinued operations [10] €	0.02	6.18	(100%)	0.04	6.47	(99%)
Basic earnings per sharea [10] €	(0.95)	6.48		0.01	8.01	(100%)
Diluted earnings per sharea [10] €	(0.95)	6.48		0.01	8.01	(100%)

a The statement of income for 2019 was adjusted retroactively on presentation of the construction chemicals activities as discontinued operations from December 21, 2019, onward. For more information, see page 204 onward of the BASF Report 2019, Note 1.4

b In the second half of 2019, the gain on the disposal of the oil and gas business was adjusted retroactively as of May 1, 2019.

Statement of Income and Expense Recognized in Equity

Statement of comprehensive income

Million €		H1 2020		H1 2019
	BASF Group	Shareholders of BASF SE	Noncontrolling interests	BASF Group	Shareholders of BASF SE	Noncontrolling interests
Income after taxes	29	7	22	7,369	7,360	9
Remeasurement of defined benefit plans	(231)	(231)	–	(1,820)	(1,820)	–
Deferred taxes on nonreclassifiable gains/losses	(38)	(38)	–	614	614	–
Nonreclassifiable gains/losses after taxes from equity-accounted investments	(12)	(12)	–	–	–	–
Nonreclassifiable gains/losses	(281)	(281)	–	(1,206)	(1,206)	–
Unrealized gains/losses from fair value changes in securities measured at FVOCIa	−	–	–	–	–	–
Reclassification of realized gains/losses recognized in the statement of income	–	–	–	–	–	–
Fair value changes in securities measured through other comprehensive income, net	−	−	–	–	–	–
Unrealized gains/losses in connection with cash flow hedges	117	117	–	1	1	–
Reclassification of realized gains/losses recognized in the statement of income	10	10	–	9	9	–
Fair value changes in options designated as cash flow hedges, net	127	127	–	10	10	–
Unrealized gains/losses from currency translation	(528)	(525)	(3)	894	883	11
Deferred taxes on reclassifiable gains/losses	(30)	(30)	–	(16)	(16)	–
Reclassifiable gains/losses after taxes from equity-accounted investments	(150)	(150)	–	344	344	–
Reclassifiable gains/losses	(581)	(578)	(3)	1,232	1,221	11
Other comprehensive income after taxes	(862)	(859)	−	26	15	−
Comprehensive income	(833)	(852)	19	7,395	7,375	20

a FVOCI: fair value through other comprehensive income

Key Figures Consolidated Interim Management's Report 2020 Information on Q2 2020 Condensed Consolidated Half-Year Financial Statements 2020 Statement of Income and Expense Recognized in Equity

Development of income and expense recognized in equity attributable to shareholders of BASF SE

Million €
	Other comprehensive income
	Remeasurement of defined benefit plans	Unrealized gains/losses from currency translation	Measurement of securities at fair value	Cash flow hedges	Total income and expense recognized in equity
As of January 1, 2020	(5,618)	798	5	(35)	(4,850)
Changes	(243)	(697)	3	146	(791)
Transfers	−	−	−	−	–
Deferred taxes	(38)	8	−	(38)	(68)
As of June 30, 2020	(5,899)	109	8	73	(5,709)
As of January 1, 2019	(5,365)	(466)	5	(113)	(5,939)
Changes	(1,820)	1,191	2	44	(583)
Transfers	140	−	−	−	140
Deferred taxes	614	(13)	−	(3)	598
As of June 30, 2019	(6,431)	712	7	(72)	(5,784)

Key Figures Consolidated Interim Management's Report 2020 Information on Q2 2020 Condensed Consolidated Half-Year Financial Statements 2020 Balance Sheet

Balance Sheet

Assets

Million €
Explanations in note	June 30, 2020	June 30, 2019	+/–	December 31, 2019	+/–
Intangible assets	14,874	16,328	(9%)	14,525	2%
Property, plant and equipment	21,883	22,118	(1%)	21,792	0%
Integral investments accounted for using the equity methodb	1,761	1,860	(5%)	1,885	(7%)
Non-integral investments accounted for using the equity methoda, b	11,982	14,047	(15%)	13,123	(9%)
Other financial assets	628	638	(2%)	636	(1%)
Deferred tax assets	2,826	2,973	(5%)	2,887	(2%)
Other receivables and miscellaneous assets	1,202	974	23%	1,112	8%
Noncurrent assets [11]	55,156	58,938	(6%)	55,960	(1%)
Inventories	10,797	12,356	(13%)	11,223	(4%)
Accounts receivable, trade	9,403	11,233	(16%)	9,093	3%
Other receivables and miscellaneous assets	4,761	3,705	29%	3,790	26%
Marketable securities	350	47		444	(21%)
Cash and cash equivalentsc	5,212	2,118	146%	2,427	115%
Assets of disposal groups	4,690	−	−	4,013	17%
Current assets [12]	35,213	29,459	20%	30,990	14%
Total assets	90,369	88,397	2%	86,950	4%

a In the second half of 2019, the gain on the disposal of the oil and gas business was adjusted retroactively as of May 1, 2019.

b For more information on the classification of equity-accounted investments as integral and non-integral, see Note 1 on page 31

c For a reconciliation of the amounts in the statement of cash flows with the balance sheet item cash and cash equivalents, see page 28 of these consolidated half-year financial statements.

Key Figures Consolidated Interim Management's Report 2020 Information on Q2 2020 Condensed Consolidated Half-Year Financial Statements 2020 Balance Sheet

Equity and liabilities

Million €
Explanations in note	June 30, 2020	June 30, 2019	+/–	December 31, 2019	+/–
Subscribed capital	1,176	1,176	−	1,176	−
Capital reserves	3,115	3,118	0%	3,115	−
Retained earnings	39,029	40,992	(5%)	42,056	(7%)
Other comprehensive income	(5,709)	(5,784)	1%	(4,850)	(18%)
Equity attributable to shareholders of BASF SE	37,611	39,502	(5%)	41,497	(9%)
Noncontrolling interests	770	840	(8%)	853	(10%)
Equity [13]	38,381	40,342	(5%)	42,350	(9%)
Provisions for pensions and similar obligations [14]	7,871	9,063	(13%)	7,683	2%
Tax provisions and deferred tax liabilitiesa	2,636	2,349	12%	2,280	16%
Other provisions [15]	1,319	1,347	(2%)	1,340	(2%)
Financial indebtedness [16]	16,664	15,960	4%	15,015	11%
Other liabilities [16]	1,819	1,851	(2%)	1,678	8%
Noncurrent liabilities	30,309	30,570	(1%)	27,996	8%
Accounts payable, trade	3,820	4,835	(21%)	5,087	(25%)
Provisions	3,138	3,576	(12%)	2,938	7%
Tax liabilities	931	763	22%	756	23%
Financial indebtedness	9,417	5,077	85%	3,362	180%
Other liabilities	3,179	3,234	(2%)	3,427	(7%)
Liabilities of disposal groups	1,194	−	−	1,034	15%
Current liabilities	21,679	17,485	24%	16,604	31%
Total equity and liabilities	90,369	88,397	2%	86,950	4%

a In the second half of 2019, the gain on the disposal of the oil and gas business was adjusted retroactively as of May 1, 2019.

Key Figures Consolidated Interim Management's Report 2020 Information on Q2 2020 Condensed Consolidated Half-Year Financial Statements 2020 Statement of Cash Flows

Statement of Cash Flows

Statement of cash flows

			H1
2020	2019	2020	2019
(878)	5,954	7	7,360
1,050	1,078	2,049	2,109
1,190	854	(1,810)	(904)
880	(5,940)	966	(6,246)
2,242	1,946	1,212	2,319
(726)	(981)	(1,295)	(1,722)
−	2,174	(1,245)	2,292
21	96	15	(118)
(705)	1,289	(2,525)	452
3	1	4	1
3,470	(834)	7,799	(214)
(3,100)	(3,014)	(3,136)	(3,014)
373	(3,847)	4,667	(3,227)
1,910	(612)	3,354	(456)
3,852	2,730	2,408	2,574
5,762	2,118	5,762	2,118
		Q2

a In the first quarter of 2020, BASF SE transferred securities in the amount of €80 million (first quarter of 2019: €300 million) to BASF Pensionstreuhand e.V., Ludwigshafen am Rhein, Germany. This transfer was not cash effective and therefore had no effect on the statement of cash flows.

b In 2020 and 2019, cash and cash equivalents presented in the statement of cash flows deviate from the figures in the balance sheet, as the relevant amounts were reclassified in the balance sheet to assets of disposal groups. The disposal group for the oil and gas business contained cash and cash equivalents of €219 million as of January 1, 2019, and €447 million as of March 31, 2019. There was no longer a deviation from the figure in the balance sheet as of June 30, 2019.

As of January 1, 2020, cash and cash equivalents deviate from the figure in the balance sheet due to the reclassification of cash and cash equivalents to the disposal groups for the construction chemicals business (€21 million) and the pigments business (€7 million). As of March 31, 2020, €24 million was reclassified in the balance sheet to the disposal group for the construction chemicals business, and €12 million to the disposal group for the pigments business. As of June 30, 2020, €538 million was reclassified to the disposal group for the construction chemicals business, and €12 million to the disposal group for the pigments business.

Statement of Changes in Equity

H1 2020

Million €
	Number of shares outstanding	Subscribed capital	Capital reserves	Retained earnings	Other comprehensive incomea	Equity attributable to shareholders of BASF SE	Noncontrolling interests	Equity
As of January 1, 2020	918,478,694	1,176	3,115	42,056	(4,850)	41,497	853	42,350
Effects of acquisitions achieved in stages	–	–	–	–	–	–	–	–
Dividends paid	–	–	–	(3,031)	–	(3,031)	(105) b	(3,136)
Income after taxes	–	–	–	7	–	7	22	29
Changes to income and expense recognized directly in equity	–	–	–	–	(859)	(859)	(3)	(862)
Changes in scope of consolidation and other changes	–	–	–	(3)	–	(3)	3	–
As of June 30, 2020	918,478,694	1,176	3,115	39,029	(5,709)	37,611	770	38,381

H1 2019

Million €

	Number of shares outstanding	Subscribed capital	Capital reserves	Retained earnings	Other comprehensive incomea	Equity attributable to shareholders of BASF SE	Noncontrolling interests	Equity
As of January 1, 2019	918,478,694	1,176	3,118	36,699	(5,939)	35,054	1,055	36,109
Effects of acquisitions achieved in stages	–	–	–	–	–	–	–	–
Dividends paid	–	–	–	(2,939)	–	(2,939)	(75) b	(3,014)
Income after taxes	–	–	–	7,360	–	7,360	9	7,369
Changes to income and expense recognized directly in equity	–	–	–	–	15	15	11	26
Changes in scope of consolidation and other changes	–	–	–	(128)	140	12	(160)	(148)
As of June 30, 2019	918,478,694	1,176	3,118	40,992	(5,784)	39,502	840	40,342

a Details are provided in the Statement of Income and Expense Recognized in Equity on page 24.

b Including profit and loss transfers

Key Figures Consolidated Interim Management's Report 2020 Information on Q2 2020 Condensed Consolidated Half-Year Financial Statements 2020 Segment Reporting

Segment Reporting

Million €
		Sales			EBITDA before special itemsa			EBITDAa		Income from operations (EBIT) before special itemsb
	2020	2019	+/–	2020	2019	+/–	2020	2019	+/–	2020	2019	+/–
Chemicals	4,141	4,728	(12%)	607	791	(23%)	596	771	(23%)	172	425	(60%)
Materials	5,017	5,892	(15%)	562	999	(44%)	459	986	(53%)	129	657	(80%)
Industrial Solutions	3,917	4,327	(9%)	623	720	(13%)	560	853	(34%)	436	507	(14%)
Surface Technologies	7,427	6,183	20%	304	495	(39%)	290	487	(40%)	69	280	(75%)
Nutrition & Care	3,137	3,056	3%	719	645	11%	711	626	14%	510	442	15%
Agricultural Solutions	4,585	4,445	3%	1,288	1,208	7%	1,242	1,148	8%	929	861	8%
Other	1,209	1,443	(16%)	(295)	(331)	11%	(360)	(555)	35%	(379)	(427)	11%
BASF Group	29,433	30,074	(2%)	3,808	4,527	(16%)	3,498	4,316	(19%)	1,866	2,745	(32%)

Other in H1d

Million €
	2020	2019	+/–
Sales	1,209	1,443	(16%)
Income from operations (EBIT) before special items	(379)	(427)	11%
of which costs for cross-divisional corporate research	(156)	(197)	21%
costs of corporate headquarters	(111)	(124)	10%
other businesses	51	85	(40%)
foreign currency results, hedging and other measurement effects	3	(38)
miscellaneous income and expenses	(166)	(153)	(8%)
Special items	(70)	(228)	69%
Income from operations (EBIT)	(449)	(655)	31%

d For more information on Other, see pages 36 and 37 of the Notes to the Consolidated Half-Year Financial Statements

Million €
		Income from operations (EBIT)		Research and development expenses		Assets		Investments including acquisitionsc
	2020	2019	+/–	2020	2019	+/–	2020	2019	+/–	2020	2019	+/–
Chemicals	152	265	(43%)	49	53	(8%)	8,642	9,058	(5%)	513	572	(10%)
Materials	17	640	(97%)	86	95	(9%)	9,831	9,174	7%	1,506	321	369%
Industrial Solutions	373	635	(41%)	88	96	(8%)	6,983	7,193	(3%)	135	182	(26%)
Surface Technologies	41	269	(85%)	103	102	1%	11,700	11,378	3%	220	228	(4%)
Nutrition & Care	499	331	51%	74	73	1%	6,584	6,386	3%	206	209	(1%)
Agricultural Solutions	882	801	10%	407	398	2%	16,736	17,348	(4%)	136	116	17%
Other	(449)	(655)	31%	167	204	(18%)	29,893	27,860	7%	74	147	(50%)
BASF Group	1,515	2,286	(34%)	974	1,021	(5%)	90,369	88,397	2%	2,790	1,775	57%

a For an explanation of this indicator, see page 49 of the BASF Report 2019, Results of Operations

b For an explanation of this indicator, see page 30 of the BASF Report 2019, Value-Based Management

c Additions to property, plant and equipment and intangible assets

Selected exchange rates

Key Figures Consolidated Interim Management's Report 2020 Information on Q2 2020 Condensed Consolidated Half-Year Financial Statements 2020 Notes to the Consolidated Half-Year Financial Statements

Notes to the Consolidated Half-Year Financial Statements

1 Basis of presentation

The Consolidated Financial Statements of the BASF Group for the year ending December 31, 2019, were prepared in accordance with the International Financial Reporting Standards (IFRS) in effect as of the balance sheet date. The Consolidated Half-Year Financial Statements as of June 30, 2020, have been prepared – in line with the rules of International Accounting Standard 34 – in abbreviated form and largely continuing the same accounting policies.

One change arose with respect to the presentation of some of the investments accounted for using the equity method that are not an integral part of the BASF Group. These include, in particular, the shares in Wintershall Dea GmbH, Kassel/Hamburg, Germany, and Solenis UK International Ltd., London, United Kingdom. To increase reporting transparency, these will be classified in the future as purely financial investments and reported separately from the shareholdings that are integral to the main business activities of the BASF Group. One material equity-accounted interest that has been classified as integral is BASF-YPC Company Ltd., Nanjing, China. Consequently, income from non-integral companies accounted for using the equity method is not presented in the BASF Group's EBIT and EBIT before special items, but under net income from shareholdings. Due to its increased significance, this will be presented as a separate subtotal within income before income taxes and is no longer part of the financial result. Integral and non-integral investments accounted for using the equity method will also be shown separately in the balance sheet. The statement of income for 2019 has been restated accordingly.

In the second half of 2019, the gain on the disposal of the oil and gas business was adjusted retroactively as of May 1, 2019. This led to changes to income after taxes from discontinued operations, non-integral investments accounted for using the equity method,

EUR 1 equals
		Closing rates		Average rates H1
	June 30, 2020	Dec. 31, 2019	2020	2019
Brazil (BRL)	6.11	4.52	5.41	4.34
China (CNY)	7.92	7.82	7.75	7.67
United Kingdom (GBP)	0.91	0.85	0.87	0.87
Japan (JPY)	120.66	121.94	119.27	124.28
Malaysia (MYR)	4.80	4.60	4.68	4.65
Mexico (MXN)	25.95	21.22	23.84	21.65
Norway (NOK)	10.91	9.86	10.73	9.73
Russian Federation (RUB)	79.63	69.96	76.67	73.74
Switzerland (CHF)	1.07	1.09	1.06	1.13
South Korea (KRW)	1,345.83	1,296.28	1,329.53	1,295.20
United States (USD)	1.12	1.12	1.10	1.13

and deferred tax liabilities. In addition, the statement of income for 2019 was adjusted retroactively on presentation of the construction chemicals activities as a discontinued operation from December 21, 2019, onward.

For more information, see page 204 onward of the BASF Report 2019, Note 1.4

The Condensed Consolidated Half-Year Financial Statements and the Consolidated Interim Management's Report have not been audited, nor have they undergone an auditor's review.

The BASF Report 2019 containing the Consolidated Financial Statements as of December 31, 2019, can be found online at basf.com/report

Accounting policies applied for the first time in 2020

Amendments to References to the Conceptual Framework in IFRS Standards

The amendments update references to and quotes from the Conceptual Framework and were endorsed by the E.U. on November 29, 2019. The revised Conceptual Framework issued on March 29, 2018 replaces the previous Conceptual Framework from 2010. The main changes primarily relate to the definition, recognition and measurement of assets and liabilities, as well as the differentiation between income and expense and other comprehensive income. They have no effect on BASF's Consolidated Financial Statements.

Amendments to IAS 1 – Financial Statement Presentation and IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors

The amendments issued by the IASB on October 31, 2018 provide a uniform and more precise definition of the materiality of information provided in the financial statements, together with accompanying examples. In this connection, the definitions in the Conceptual Framework, IAS 1, IAS 8 and the IFRS Practice Statement 2 (Making Materiality Judgements) were harmonized. The amendments were endorsed by the E.U. on November 29, 2019. They have no effect on the reporting of BASF.

Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest Rate Benchmark Reform

The IASB issued amendments to IFRS 9, IAS 39 and IFRS 7 on September 26, 2019, completing Phase 1 of the Interest Rate Benchmark Reform project. The amendments relate to existing uncertainties surrounding the interest rate benchmark reform. According to the original hedge accounting policies, pending adjustments to interest rate benchmarks would, in many cases, have resulted in an end to hedging relationships. The amendments to IFRS 9 and IAS 39 ensure the continuity of hedging relationships despite existing uncertainties regarding interest rate benchmarks, for example by defining that the highly probable requirement is always considered to be met. In connection with the amendments to IFRS 9 and IAS 39, additional disclosure requirements were added to IFRS 7. The amendments were endorsed by the E.U. on January 15, 2020. This change does not have any impact on BASF as of June 30, 2020, as no hedging relationships affected by interest rate benchmarks were subject to hedge accounting.

Amendments to IFRS 3 – Business Combinations

The amendments issued on October 22, 2018, clarify that a business is a set of activities and assets with at least one input and one substantive process that together significantly contribute to the ability to create outputs. Outputs are defined as the provision of goods and services to customers. The existing reference to cost reduction was removed. In addition, the new provisions also contain an optional concentration test designed to simplify identification of a business. The modified definition was endorsed by the E.U. on April 21, 2020, and is to be applied to business combinations with an acquisition date on or after January 1, 2020. These amendments have no material effect on the reporting of BASF.

The IASB has proposed a further amendment to IFRS 16 – Leases relating to COVID-19-related rent concessions. This amendment is to be applied from June 1, 2020, onward but has not yet been endorsed by the E.U. These amendments are not expected to have any effect on the reporting of BASF.

2 Scope of consolidation

Scope of consolidation

In addition to BASF SE, all material subsidiaries are included in the BASF Group Financial Statements on a fully consolidated basis. Joint arrangements that are classified as joint operations according to IFRS 11 are proportionally consolidated. Changes in the number of fully and proportionally consolidated companies are shown in the table.

Since the beginning of 2020, 21 companies have been included in the scope of consolidation for the first time: 11 due to their increased materiality, one newly established company and nine acquired companies. The deconsolidations resulted from one liquidation, one merger and two companies that were no longer included in the scope of consolidation due to reduced materiality.

	2020	2019
As of January 1	302	331
of which proportionally consolidated	7	8
First-time consolidations	21	4
of which proportionally consolidated	2	−
Deconsolidations	4	21
of which proportionally consolidated	–	1
As of June 30	319	314
of which proportionally consolidated	9	7

Companies accounted for using the equity method

	2020	2019
As of January 1	25	35
As of June 30	25	26

Notes to the Consolidated Half-Year Financial Statements

3 Acquisitions and divestitures

Preliminary purchase price allocation for the acquisition of assets and liabilities from Solvay

Acquisitions

BASF closed the acquisition of Solvay's polyamide business (PA 6.6) on January 31, 2020. DOMO Chemicals, Leuna, Germany, was approved by the E.U. Commission as the buyer of the European polyamide business, which could not be acquired by BASF under the conditions imposed by the authorities. The transaction broadens BASF's polyamide capabilities with innovative and well-known products such as Technyl®. It also enhances the company's access to growth markets in Asia as well as in North and South America. Through the backward integration into the key raw material adiponitrile (ADN), BASF is now represented along the entire polyamide 6.6 value chain and can offer improved delivery reliability. The purchase price of the business acquired by BASF was €1.3 billion on a cash and debt-free basis. The business was integrated into the Performance Materials and Monomers divisions. The transaction between Solvay and BASF included eight production sites in Germany, France, China, India, South Korea, Brazil and Mexico, as well as research and development and technical consultation centers in Asia and the Americas. It also included two investments in France, which are accounted for as joint operations: the 50% interest in Butachimie SNC, Chalampé, France, to produce ADN and hexamethylenediamine, and the 51% interest in the newly established Alsachimie S.A.S., Chalampé, France, to produce adipic acid. With the acquisition, around 700 Solvay employees were transferred to BASF.

The preliminary purchase price allocation considers all the facts and circumstances prevailing as of the date of acquisition that were known prior to the preparation of these Consolidated Half-Year Financial Statements. In accordance with IFRS 3, should further such facts and circumstances become known within the 12-month measurement period, the purchase price allocation can be adjusted accordingly.

Million €
	Fair value as of date of acquisition
Goodwill	118
Other intangible assets	650
Property, plant and equipment	434
Investments accounted for using the equity method	–
Other financial assets	–
Deferred taxes	8
Other receivables and miscellaneous assets	55
Noncurrent assets	1,265
Inventories	153
Accounts receivable, trade	165
Other receivables and miscellaneous assets	161
Marketable securities	–
Cash and cash equivalents	63
Current assets	542
Total assets	1,807

Provisions for pensions and similar obligations	30
Tax provisions and deferred tax liabilities	35
Other provisions	8
Financial indebtedness	–
Other liabilities	45
Noncurrent liabilities	118
Accounts payable, trade	274
Provisions	2
Tax liabilities	28
Financial indebtedness	3
Other liabilities	74
Current liabilities	381
Total liabilities	499

Total purchase price	1,308

business

Goodwill of €118 million resulted in particular from cost and sales synergies.

Agreed transactions

On August 29, 2019, BASF and the fine chemicals company DIC, Tokyo, Japan, signed an agreement on the transfer of the global pigments business. The purchase price on a cash and debt-free basis is €1.15 billion. The transaction is expected to close in the fourth quarter of 2020. The sale is subject to approval by the relevant antitrust authorities. The transaction affects approximately 2,600 employees in the Dispersions & Pigments division.
On December 21, 2019, BASF and a subsidiary of Lone Star, Dallas, Texas, signed an agreement on the sale of BASF's construction chemicals business. The purchase price on a cash and debt-free basis is €3.17 billion. The transaction is expected to close in the third quarter of 2020, subject to the approval of the relevant antitrust authorities. The planned sale covers more than 7,000 employees as well as production sites and sales offices in more than 60 countries in the former Construction Chemicals division.

Discontinued operations

Earnings from the discontinued construction chemicals business were as follows:

Million €
	Jan. 1–June 30, 2020	Jan. 1–June 30, 2019
Sales revenue	1,187	1,261
Cost of sales	(608)	(696)
Gross profit on sales	579	565
Selling expenses	(356)	(431)
General administrative expenses	(51)	(34)
Research and development expenses	(17)	(16)
Other operating income and expenses	(104)	(25)
Income from companies accounted for using the equity method	–	–
EBIT	51	59
Financial result	(2)	(2)
Income before income taxes	49	57
Income taxes	(13)	(15)
Income after income taxes	36	42
of which attributable to noncontrolling interests	3	4
Income after noncontrolling interests	33	38
Earnings per share from discontinued operations	€ 0.04	0.04

Statement of income from the discontinued construction chemicals

The discontinued construction chemicals business accounted for the following amounts in the BASF Group's statement of cash flows:

Cash flows from the discontinued construction chemicals business

Million €
	Jan. 1–June 30, 2020	Jan. 1–Dec. 31, 2019
Cash flows from operating activities	(1)	219
Cash flows from investing activities	(68)	(107)
Cash flows from financing activities	(29)	(18)
Total	(98)	94

Groups of assets and liabilities held for sale (disposal groups)

With the agreement on the acquisition of the global pigments business by the fine chemical company DIC, the affected assets and liabilities were reclassified to a disposal group. The business is allocated to the Dispersions & Pigments division.

An impairment test was conducted for the disposal group for the pigments business on June 30, 2020. The recoverable amount was determined as of June 30, 2020, by discounting expected cash flows until closing, including income from the sale, at a WACC of 7.98%. This resulted in an impairment in the amount of €66 million, which reduced the goodwill of the disposal group for the pigments business accordingly.

4 Segment reporting

The BASF Group's business is run by 11 divisions, structured in six segments:

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

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

The Chemicals segment comprises the Petrochemicals and Intermediates divisions and is the cornerstone of BASF's Verbund structure. It supplies the other segments with basic chemicals and intermediates, contributing to the organic growth of our key value chains. Alongside internal transfers, customers include the chemical and plastics industries. The segment's competitiveness is strengthened by technological leadership and operational excellence.

The Materials segment is composed of the Performance Materials division and the Monomers division. The segment offers advanced materials and their precursors for new applications and systems. Its product portfolio includes isocyanates and polyamides as well as inorganic basic products and specialties for plastics and plastics processing.

The Industrial Solutions segment consists of the Dispersions & Pigments and the Performance Chemicals divisions. The segment develops and markets ingredients and additives for industrial applications, such as polymer dispersions, pigments, resins, electronic materials, antioxidants and additives. Its customers come from key industries such as automotive, plastics and electronics.

The Surface Technologies segment bundles chemical solutions for surfaces with the Catalysts and Coatings divisions. Its product spectrum includes catalysts and battery materials for the automotive and chemical industries, surface treatments, colors and coatings.

The Nutrition & Care segment comprises the Care Chemicals division and the Nutrition & Health division. The segment produces ingredients and solutions for consumer applications in the areas of nutrition, home and personal care. Its customers include food and feed producers as well as the pharmaceutical, cosmetics, and the detergent and cleaner industries.

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

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

These include other businesses, which comprise commodity trading, engineering and other services, rental income and leases. Discontinued operations and certain activities remaining after divestitures are also reported here. The former Construction Chemicals division is classified as a discontinued operation. As such, it has been reported under Other since the sale of the construction chemicals business to an affiliate of Lone Star was agreed on December 21, 2019.

The following activities are also presented under Other:

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

Reconciliation of segment income to income before income taxes

Million €
	H1
	2020	2019
EBIT before special items of the segments	2,245	3,172
EBIT before special items of Other	(379)	(427)
EBIT before special items	1,866	2,745
Special items of the segments	(281)	(231)
Special items of Other	(70)	(228)
Special items	(351)	(459)
EBIT of the segments	1,964	2,941
EBIT of Other	(449)	(655)
EBIT	1,515	2,286
Net income from shareholdings	(956)	(44)
Financial result	(282)	(393)
Income before income taxes	277	1,849

Million €
		June 30, 2020 June 30, 2019a
Segment assets	60,476	60,537
Assets of businesses included in Other	2,207	2,631
Other financial assets and non-integral investments accounted for using the equity method	12,610	14,685
Deferred tax assets	2,826	2,973
Cash and cash equivalents / marketable securities	5,562	2,165
Defined benefit assets	125	199
Other receivables / prepaid expenses	3,828	2,334
Assets of the construction chemicals business disposal group	2,735	2,873
Assets of Other	29,893	27,860
Assets of the BASF Group	90,369	88,397

Reconciliation of segment assets to the assets of the BASF Group

a The carrying amounts of non-integral investments accounted for using the equity method previously presented under "Assets of businesses included in Other" have been reclassified to "Other financial assets and non-integral investments accounted for using the equity method."

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

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

5 Other operating income and expenses

Other operating income

Million €
	H1
	2020	2019
Income from the adjustment and release of provisions recognized in other operating expenses	6	24
Revenue from miscellaneous activities	114	86
Income from foreign currency and hedging transactions as well as from the measurement of LTI options	119	25
Income from the translation of financial statements in foreign currencies	9	4
Gains on divestitures and the disposal of noncurrent assets	45	359
Reversals of impairment losses on noncurrent assets	–	2
Income from the reversal of valuation allowances for business-related receivables	12	10
Other	299	197
Other operating income	604	707

Other operating expenses

Million €
		H1
	2020	2019
Restructuring and integration measures	223	429
Environmental protection and safety measures, costs of demolition and removal, and project costs not subject to mandatory capitalization	136	131
Depreciation, amortization and impairments of noncurrent assets	130	272
Costs from miscellaneous revenue-generating activities	102	70
Expenses from foreign currency and hedging transactions as well as from the measurement of LTI options	163	118
Losses from the translation of financial statements in foreign currencies	14	9
Losses from divestitures and the disposal of noncurrent assets	22	6
Expenses from the addition of valuation allowances on business-related receivables	38	33
Expenses for derecognition of obsolete inventory	137	91
Other	407	333
Other operating expenses	1,372	1,492

Income from foreign currency and hedging transactions as well as from the measurement of LTI options rose from €25 million in the first half of 2019 to €119 million in the first half of 2020. This was mainly due to higher income from the release of provisions for the long-term incentive program (LTI program).

At €45 million, gains on divestitures and the disposal of noncurrent assets in the first half of 2020 were significantly below the figure for the prior-year period. The higher gains in the first half of 2019 resulted from the merger of the paper and water chemicals business with Solenis and the sale of a development project for seed treatment.

Other income increased to €299 million (H1 2019: €197 million), mainly as a result of higher gains from precious metal trading.

Restructuring expenses in connection with BASF's excellence program in the first half of 2020 were lower than in the prior-year period. The expenses from the integration of Solvay's global polyamide business as of January 31, 2020, were lower than the expenses from integration measures in the previous year, which related to the seed and non-selective herbicide businesses acquired from Bayer.

The decrease in depreciation, amortization and impairments of noncurrent assets was due among other factors to lower impairments. In the previous year, this included the impairment of a natural gas-based investment on the U.S. Gulf Coast.

Expenses from foreign currency and hedging transactions and from the measurement of LTI options rose, mainly as a result of higher losses from the measurement of LTI options.

The increase in other expenses was primarily attributable to expenses in connection with the COVID-19 pandemic, in particular BASF's "Helping Hands" aid campaign.

6 Income from companies accounted for using the equity method

Income from investments accounted for using the equity method decreased from €94 million in the first half of 2019 to minus €907 million in the first half of 2020. Of the €1,001 million decline in income, €902 million related to non-integral and €99 million to integral investments accounted for using the equity method. The decline in income from non-integral investments accounted for using the equity method was mainly attributable to an impairment of the shareholding in Wintershall Dea GmbH, Kassel/Hamburg, Germany, in the amount of €819 million due to lower oil and gas price forecasts and changed reserve estimates. Of the decrease in income from integral investments accounted for using the equity method, €90 million related to the shareholding in BASF-YPC Company Ltd., Nanjing, China, primarily due to the scheduled turnarounds of the production plants.

7 Net income from shareholdings and financial result

Net income from shareholdings
Million €	H1
	2020	2019
Income from non-integral companies accounted for using the equity method	(941)	(39)
Dividends and similar income	2	21
Income from the disposal of shareholdings	20	4
Income from profit transfer agreements	–	1
Income from tax allocation to shareholdings	–	–
Income from other shareholdings	22	26
Expenses from loss transfer agreements	(26)	(30)
Write-downs on / losses from the sale of shareholdings	(11)	(1)
Expenses from other shareholdings	(37)	(31)
Net income from shareholdings	(956)	(44)

Net income from shareholdings decreased, primarily due to an impairment of the shareholding in Wintershall Dea GmbH, Kassel/ Hamburg, Germany, in the amount of €819 million. The impairment was attributable to lower oil and gas price forecasts and changed reserve estimates.

For more information, see Note 11 from page 42 onward

Financial result
Million €		H1
	2020	2019
Interest income from cash and cash equivalents	74	84
Interest and dividend income from securities and loans	9	7
Interest income	83	91
Interest expenses	(293)	(332)
Interest result	(210)	(241)
Reversals of write-downs on / income from securities and loans	3	–
Net interest income from overfunded pension plans and similar obligations	−	−
Income from the capitalization of borrowing costs	15	16
Miscellaneous financial income	23	−
Other financial income	41	16
Write-downs on / losses from securities and loans	(56)	(4)
Net interest expense from underfunded pension plans and similar obligations	(54)	(76)
Net interest expense from other long-term personnel obligations	−	(1)
Unwinding the discount on other noncurrent liabilities	(3)	(2)
Miscellaneous financial expenses	−	(85)
Other financial expenses	(113)	(168)
Other financial result	(72)	(152)
Financial result	(282)	(393)

The interest result rose by €31 million, from minus €241 million to minus €210 million, mainly due to lower interest expenses for financial indebtedness in the first half of 2020.

The net interest expense from underfunded pension plans and similar obligations declined year on year as a result of the lower interest rate used to determine expenses for pension benefits compared with the previous year.

The decline in other financial expenses was primarily due to lower expenses for hedging bonds and U.S. dollar commercial paper against interest and currency risks.

Earnings per share

Income before income taxes Million € H1 2020 2019 Germany (1,136) 406 Foreign 1,413 1,443 Income before income taxes 277 1,849

Income taxes

		H1
		2020	2019
Germany	Million €	32	133
Foreign	Million €	252	310
Income taxes	Million €	284	443
Tax rate	%	102.5	24.0

The increase in the tax rate from 24.0% to 102.5% was mainly due to the non-tax-effective impairment of the shareholding in Wintershall Dea GmbH.

8 Income taxes 9 Noncontrolling interests 10 Earnings per share

Noncontrolling interests
Million €
		H1
	2020	2019
Noncontrolling interests in profits	47	44
Noncontrolling interests in losses	(25)	(35)
Noncontrolling interests	22	9

			H1
		2020	2019
Net income	Million €	7	7,360
Number of outstanding shares (weighted average)	1,000	918,479	918,479
Earnings per share	€	0.01	8.01

Noncontrolling interests in losses declined year on year, mainly due to scheduled turnarounds of the steam cracker at BASF TOTAL Petrochemicals LLC, Port Arthur, Texas, in the first half of 2019.

Earnings per share is calculated based on the weighted average number of common shares outstanding. The calculation of diluted earnings per common share reflects all possible outstanding common shares and the resulting effect on income of BASF's "plus" employee incentive share program.

In the first half of 2020, and in the prior-year period, there was no dilutive effect; basic earnings per share were the same as the diluted value per share.

11 Noncurrent assets

Development of intangible assets and property, plant and equipment H1

Million €
	Intangible assets		Property, plant and equipment
	2020	2019	2020	2019
Cost
As of January 1	17,555	20,364	65,508	64,303
Additions	805	59	1,985	1,716
Disposals	(31)	(122)	(418)	(297)
Transfers	(55)	(1)	35	12
Currency effects	(120)	104	(477)	175
As of June 30	18,154	20,404	66,633	65,909
Accumulated depreciation and amortization
As of January 1	3,030	3,813	43,716	42,228
Additions	340	363	1,643	1,746
Disposals	(19)	(120)	(372)	(273)
Transfers	(57)	–	(2)	6
Currency effects	(14)	20	(235)	84
As of June 30	3,280	4,076	44,750	43,791
Net carrying amount as of June 30	14,874	16,328	21,883	22,118

In addition, the acquisition of Solvay's global polyamide business added property, plant and equipment in the amount of €434 million and intangible assets in the amount to €768 million.

For more information, see Note 3 from page 34 onward

As well as depreciation, the item additions to depreciation and amortization on property, plant and equipment included, in particular, discontinued investments in North America.

Currency effects were primarily due to the depreciation of the Brazilian real against the euro.

Development of investments accounted for using the equity method

Million €
	H1
	Integral		Non-integral		Total
	2020	2019	2020	2019	2020	2019
As of January 1	1,885	1,927	13,123	284	15,008	2,211
Additions	−	10	−	14,668	−	14,678
Disposals	(5)	(33)	(11)	(871)	(16)	(904)
Transfers	(85)	(52)	(993)	(45)	(1,078)	(97)
Currency effects	(34)	8	(137)	11	(171)	19
Net carrying amount as of June 30	1,761	1,860	11,982	14,047	13,743	15,907

Additions to property, plant and equipment were mainly due to investment projects. As well as the expansion of the vitamin A plant in Ludwigshafen, Germany, these included construction and expansion projects and modernization measures, in particular at the sites in Ludwigshafen, Germany; Antwerp, Belgium; Shanghai, China; Geismar, Louisiana; and Freeport, Texas.

In the first half of 2019, additions to non-integral investments accounted for using the equity method related to the shareholding in Wintershall Dea GmbH, Kassel/Hamburg, Germany, in the amount of €14,078 million and in Solenis UK International Ltd., London, United Kingdom, in the amount of €590 million.

Disposals in the first half of 2020 related to capital decreases at the integral equity-accounted shareholding in BASF Sonatrach PropanChem, S.A., Tarragona, Spain (minus €5 million) and at the non-integral shareholding in Solenis UK International Ltd. (minus €11 million). In the first half of 2019, disposals related to a capital decrease in the amount of €871 million at the non-integral equityaccounted shareholding in Wintershall Dea GmbH and the sale of the integral equity-accounted shareholding in Synvina C.V., Amsterdam, Netherlands.

Transfers in the first half of 2020 amounted to minus €1,078 million and included the income after taxes, dividend distributions, other comprehensive income and impairments of the investments accounted for using the equity method. Transfers at non-integral shareholdings mainly related to an impairment of the shareholding in Wintershall Dea GmbH in the amount of €819 million as a result of updated oil and gas price forecasts and changed reserve estimates. As part of the impairment test, the expected cash flows in euros from the exploration and production assets held by Wintershall Dea were updated and discounted. This assumed an oil price of \$43 per bbl of Brent crude in 2021 that rises to a nominal \$62 per bbl by 2023 and then develops in line with cost increases. The development of gas prices assumed a price of \$3.8 per mmbtu (TTF) for 2021 that rises to a nominal \$7.7 per mmbtu in 2025 and then follows the expected cost trend. The expected cash flows were discounted using the country-specific cost of capital rates, which reflect the relevant country risks and tax rates. The cost of capital rates in euros, calculated using the capital asset pricing model, were between 5.9% and 11.2% after taxes. This corresponds to cost of capital rates before taxes of between 8.6% and 32%. An increase in the cost of capital rate of one percentage point would lead to an additional impairment of around €1.2 billion. All other assumptions remaining the same, the effect would be approximately twice as high in the case of a 10% decrease in price assumptions over the entire planning period.

In the first half of 2020, currency effects reduced the carrying amount of investments accounted for using the equity method by €171 million. This mainly affected the non-integral shareholdings in Wintershall Dea GmbH (minus €88 million) and Solenis UK International Ltd. (minus €47 million).

Other financial assets

Million €		June 30, 2020 Dec. 31, 2019 June 30, 2019
Other shareholdings	506	501	511
Long-term securities	122	135	127
Other financial assets	628	636	638

12 Current assets

Current assets

Million €
	June 30, 2020	December 31, 2019	June 30, 2019
Raw materials and factory supplies	3,463	3,379	3,659
Work in progress, finished goods and merchandise	7,237	7,742	8,580
Advance payments and services in progress	97	102	117
Inventories	10,797	11,223	12,356
Accounts receivable, trade	9,403	9,093	11,233
Other receivables and miscellaneous assets	4,761	3,790	3,705
Marketable securities	350	444	47
Cash and cash equivalents	5,212	2,427	2,118
Assets of disposal groups	4,690	4,013	–
Other current assets	15,013	10,674	5,870
Current assets	35,213	30,990	29,459

Work in progress, finished goods and merchandise are combined into one item due to production conditions in the chemical industry. Services in progress mainly relate to services not invoiced as of the balance sheet date.

The increase in trade accounts receivable since December 31, 2019, was primarily attributable to seasonal sales volumes growth in the Agricultural Solutions segment.

The rise in the item "Other receivables and miscellaneous assets" was largely due to precious metal trading positions, derivatives with positive fair values and tax receivables.

13 Equity

Authorized capital

BASF SE has only issued fully paid-up registered shares with no par value. There are no preferential voting rights or other restrictions. BASF SE does not hold any treasury shares.

In accordance with the resolution of the Annual Shareholders' Meeting on May 3, 2019, the Board of Executive Directors was authorized, with the consent of the Supervisory Board, to increase, until May 2, 2024, on a one-off basis or in portions on a number of occasions, the company's share capital by a total of up to €470 million by issuing new shares against contributions in cash or in kind. In principle, shareholders are entitled to a subscription right. However, the Board of Executive Directors is authorized, with the approval of the Supervisory Board, to exclude shareholders' statutory subscription rights in the cases specified in the authorizing resolution. The Board of Executive Directors is authorized, with the consent of the Supervisory Board, to lay down the further contents of the share rights and the details of the execution of the capital increase. The total shares issued on the basis of the above authorization with the exclusion of the shareholders' subscription right in the case of capital increases in return for contributions in cash or in kind must not exceed 10% of the share capital at the time that this authorization comes into effect or – if this value is lower – at the time of its exercise. The proportionate amount of the share capital of those shares that are to be issued on the basis of conversion or option bonds granted during the term of this authorization under the exclusion of the subscription right, must be credited against the aforementioned ceiling of 10%. This authorization has not been exercised to date.

Conditional capital

By way of a resolution of the Annual Shareholders' Meeting of May 12, 2017, the Board of Executive Directors was authorized, with the approval of the Supervisory Board, to issue, on a one-off basis or in portions on a number of occasions, bearer or registered convertible bonds and/or bonds with warrants, or combinations of these instruments, with or without maturity limitations up to a nominal value of €10 billion until May 11, 2022. The notional interest in the share capital attributable to the BASF shares to be issued in connection with the debt instruments issued under this authorization may not exceed 10% of the share capital.

In this connection, the share capital was increased conditionally by up to €117,565,184 by issuing a maximum of 91,847,800 new registered BASF shares. The conditional capital increase will only be carried out to the extent to which holders of convertible bonds, or warrants attached to bonds with warrants issued, exercise their conversion or option rights. This authorization has not been exercised to date.

Authorization of share buybacks

By way of a resolution of the Annual Shareholders' Meeting of May 12, 2017, the Board of Executive Directors was authorized to buy back shares until May 11, 2022, in accordance with section 71(1) no. 8 of the German Stock Corporation Act (AktG). The buyback may not exceed 10% of the company's share capital at the time the resolution was passed and can take place via the stock exchange, a public purchase offer addressed to all shareholders, or a public invitation to the shareholders to submit sales offers. This authorization has not been exercised to date.

Capital reserves

Capital reserves include effects from BASF's share program, premiums from capital increases and consideration for warrants and negative goodwill from the capital consolidation resulting from acquisitions of subsidiaries in exchange for the issue of BASF SE shares at par value.

Retained earnings

Reserves and retained earnings

Million €
		June 30, 2020 Dec. 31, 2019
Legal reserves	868	830
Other retained earnings	38,161	41,226
Retained earnings	39,029	42,056

Transfers from other retained earnings increased legal reserves by €38 million in the first half of 2020.

Payment of dividends

In accordance with the resolution of the Annual Shareholders' Meeting on June 18, 2020, BASF SE paid a dividend of €3.30 per qualifying share from the retained profit of the 2019 fiscal year. With 918,478,694 qualifying shares, this represented total dividends of €3,030,979,690.20. The remaining €868,110,024.68 in retained profits was allocated to retained earnings.

14 Provisions for pensions

Assumptions used to determine the defined benefit obligation

%	Germany		United States		Switzerland		United Kingdom
	June 30, 2020	December 31, 2019	June 30, 2020	December 31, 2019	June 30, 2020	December 31, 2019	June 30, 2020	December 31, 2019
Discount rate	1.30	1.10	2.40	3.10	0.30	0.20	1.70	2.20
Projected pension increase	1.50	1.50	−	−	−	−	3.00	3.00

Assumptions used to determine expenses for pension benefits

From January 1 to June 30 of the respective year in %
	Germany		United States		Switzerland		United Kingdom
	2020	2019	2020	2019	2020	2019	2020	2019
Discount rate	1.10	1.70	3.10	4.10	0.20	0.90	2.20	2.90
Projected pension increase	1.50	1.50	−	−	−	−	3.00	3.10

The assumptions used to determine the defined benefit obligation as of December 31, 2019, are used in the 2020 fiscal year to determine the expenses for pension plans.

The standardized return on plan assets is calculated by multiplying plan assets at the beginning of the year with the discount rate used for existing defined benefit obligations at the beginning of the year, taking into account benefit and contribution payments to be made during the year.

A slight increase in the discount rate in Switzerland and in the eurozone, and a significant decrease in the United States and in the United Kingdom led to actuarial gains on pension obligations totaling €293 million in the first half of 2020. Including the deviation between the actual return on plan assets and the standardized return on plan assets, negative remeasurement effects totaled €243 million. These were recognized in other comprehensive income (OCI), taking into account deferred taxes of €38 million. Overall, pension provisions rose by €188 million compared with December 31, 2019.

15 Other provisions

Development in H1 2020

Million €
	January 1, 2020		Additions Unwinding of discount	Utilization	Releases	Other changes	June 30, 2020
Restoration obligations	77	1	1	(2)	(2)	(1)	74
Environmental protection and remediation costs	654	47	2	(40)	(1)	3	665
Employee obligations	1,653	695	–	(1,070)	(83)	(57)	1,138
Obligations from sales and purchase contracts	1,165	1,208	–	(408)	(56)	(84)	1,825
Restructuring measures	141	11	–	(57)	(3)	–	92
Litigation, damage claims, warranties and similar obligations	126	15	1	(5)	(1)	(12)	124
Other	462	173	–	(87)	(7)	(2)	539
Total	4,278	2,150	4	(1,669)	(153)	(153)	4,457

On June 30, 2020, other provisions were €179 million above the 2019 year-end figure.

The increase in obligations from sales and purchase contracts was mainly due to the seasonal rise in provisions for discounts.

Provisions for employee obligations declined significantly following the payout of the 2019 bonus to employees of the BASF Group.

Other changes are attributable to currency effects and the reclassification of obligations to liabilities when the amount and timing of these obligations became known.

16 Liabilities

Liabilities

Million €
		June 30, 2020 December 31, 2019			June 30, 2019
	Current	Noncurrent	Current	Noncurrent	Current	Noncurrent
Accounts payable, trade	3,820	−	5,087	−	4,835	−
Bonds and other liabilities to the capital market	8,087	13,823	2,230	12,907	4,091	13,816
Liabilities to credit institutions	1,330	2,841	1,132	2,108	986	2,144
Financial indebtedness	9,417	16,664	3,362	15,015	5,077	15,960
Tax liabilities	931	−	756	−	763	−
Advances received on orders	227	−	537	−	207	−
Negative fair values from derivatives and liabilities for precious metal obligations	921	204	955	188	419	240
Liabilities related to social security	115	63	84	63	88	57
Miscellaneous liabilities	1,856	1,542	1,818	1,414	2,461	1,529
Deferred income	60	10	33	13	59	25
Other liabilities	3,179	1,819	3,427	1,678	3,234	1,851
Liabilities	17,347	18,483	12,632	16,693	13,909	17,811

Financial indebtedness

Million €

						Carrying amounts based on effective interest method
		Currency	Nominal	volumea Effective interest rate	June 30, 2020	December 31, 2019	June 30, 2019
BASF SE
Commercial paper		EUR	1,025		1,024	–	–
Commercial paper		GBP	1,000		1,094	–	–
Commercial paper		USD	4,427		3,943	861	2,488
variable	Bond 2017/2019	EUR	1,250	variable	–	–	1,251
variable	Bond 2013/2020	EUR	300	variable	–	300	300
1.875%	Bond 2013/2021	EUR	1,000	1.47%	1,003	1,004	1,006
2.500%	Bond 2017/2022	USD	500	2.65%	446	444	438
1.375%	Bond 2018/2022	GBP	250	1.52%	273	293	278
2.000%	Bond 2012/2022	EUR	1,250	1.93%	1,252	1,253	1,253
0.925%	Bond 2017/2023	USD	850	0.83%	733	726	713
0.101%	Bond 2020/2023	EUR	1,000	0.143%	999	–	–
0.875%	Bond 2016/2023	GBP	250	1.06%	272	292	277
2.500%	Bond 2014/2024	EUR	500	2.60%	498	498	498
1.750%	Bond 2017/2025	GBP	300	1.87%	327	350	332
0.875%	Bond 2018/2025	EUR	750	0.97%	747	746	746
3.675%	Bond 2013/2025	NOK	1,450	3.70%	133	147	149
0.250%	Bond 2020/2027	EUR	1,000	0.32%	996	–	–
0.875%	Bond 2017/2027	EUR	1,000	1.04%	988	987	987
2.670%	Bond 2017/2029	NOK	1,600	2.69%	146	162	165
0.875%	Bond 2019/2029	EUR	250	1.01%	247	247	247
1.500%	Bond 2018/2030	EUR	500	1.63%	494	494	494
1.500%	Bond 2016/2031	EUR	200	1.58%	199	198	198
0.875%	Bond 2016/2031	EUR	500	1.01%	493	493	493
2.370%	Bond 2016/2031	HKD	1,300	2.37%	150	149	146
1.450%	Bond 2017/2032	EUR	300	1.57%	296	296	296

Continued on next page

a Million in issuing currency as of the balance sheet date

Continued from previous page

Financial indebtedness

Million €						Carrying amounts based on effective interest method
		Currency	Nominal	volumea Effective interest rate	June 30, 2020	December 31, 2019	June 30, 2019
3.000%	Bond 2013/2033	EUR	500	3.15%	492	492	492
2.875%	Bond 2013/2033	EUR	200	2.96%	198	198	198
4.000%	Bond 2018/2033	AUD	160	4.24%	96	98	96
1.625%	Bond 2017/2037	EUR	750	1.73%	738	738	737
3.250%	Bond 2013/2043	EUR	200	3.27%	199	199	200
1.025%	Bond 2018/2048	JPY	10,000	1.03%	83	82	81
3.890%	U.S. private placement series A 2013/2025	USD	250	3.92%	223	222	219
4.090%	U.S. private placement series B 2013/2028	USD	700	4.11%	624	622	614
4.430%	U.S. private placement series C 2013/2034	USD	300	4.45%	267	266	263
	BASF Finance Europe N.V.
0.000%	Bond 2016/2020	EUR	1,000	0.14%	1,000	999	998
3.625%	Bond 2018/2025	USD	200	3.69%	178	177	175
0.750%	Bond 2016/2026	EUR	500	0.88%	496	496	495
Other bonds					562	608	584
	Bonds and other liabilities to the capital market				21,909	15,137	17,907
	Liabilities to credit institutions				4,171	3,240	3,130
Financial indebtedness					26,081	18,377	21,037
	a Million in issuing currency as of the balance sheet date

17 Related party transactions

The BASF Group maintains relationships with several related parties that can exert influence on the BASF Group or over which the BASF Group exercises control or joint control, or a significant influence. The following tables show the scope of the Group's transactions with related parties.

Sales from subsidiaries to BASF Group companies amounted to €105 million in the first half of 2020, and €91 million in the first half of 2019. Sales from joint ventures with BASF Group companies amounted to €418 million in the first half of 2020, and €326 million in the first half of 2019. Sales from associated companies with companies in the BASF Group amounted to €300 million in the first half of 2020, and €319 million in the first half of 2019.

Sales and trade accounts receivable from and trade accounts payable to related parties mainly included business with own products, merchandise, agency and licensing businesses, and other operating businesses.

Other receivables and liabilities primarily arose from financing activities, from accounts used for cash pooling, outstanding dividend payments, profit and loss transfer agreements, and other financerelated and operating activities and transactions.

The balance of valuation allowances on trade accounts receivable from related parties amounted to €4 million as of June 30, 2020, compared with €5 million as of December 31, 2019.

The balance of valuation allowances on other receivables from nonconsolidated subsidiaries rose from €23 million as of December 31, 2019, to €55 million as of June 30, 2020. Of this amount, €33 million was recognized as an expense.

The following tables show the volume of business with related parties that are included in the Consolidated Financial Statements at amortized cost or accounted for using the equity method. The values include sales, receivables, other receivables, liabilities and other liabilities with respect to the disposal groups and/or discontinued operations.

There were no reportable related-party transactions with members of the Board of Executive Directors or the Supervisory Board and their related parties during the reporting period.

Sales to related parties

Million €		H1
	2020	2019
Nonconsolidated subsidiaries	367	327
Joint ventures	435	332
Associated companies	239	319

Trade accounts receivable from / trade accounts payable to related parties

Million €

	Accounts receivable, trade
		June 30, 2020 Dec. 31, 2019 June 30, 2019
Nonconsolidated subsidiaries	231	193	186
Joint ventures	78	80	84
Associated companies	78	129	163

Accounts payable, trade

		June 30, 2020 Dec. 31, 2019 June 30, 2019
Nonconsolidated subsidiaries	77	136	68
Joint ventures	62	122	103
Associated companies	27	54	42

Other receivables from / liabilities to related parties

Million €

		Other receivables
		June 30, 2020 Dec. 31, 2019 June 30, 2019
Nonconsolidated subsidiaries	196	285	251
Joint ventures	68	80	96
Associated companies	57	57	72

		Other liabilities
		June 30, 2020 Dec. 31, 2019 June 30, 2019
Nonconsolidated subsidiaries	152	219	205
Joint ventures	48	92	675
Associated companies	304	345	232

Key Figures Consolidated Interim Management's Report 2020 Information on Q2 2020 Condensed Consolidated Half-Year Financial Statements 2020 Responsibility Statement

Responsibility Statement

To the best of our knowledge, and in accordance with the applicable reporting principles for half-year financial reporting, the Condensed Consolidated Half-Year Financial Statements give a true and fair view of the net assets, financial position and results of operations of the Group, and the Consolidated Interim Management's Report includes a fair review of the development and performance of the business as well as the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group for the remaining fiscal year.

Ludwigshafen, July 21, 2020

BASF SE The Board of Executive Directors Quarterly Statement Q3 2020

October 28, 2020

BASF Report 2020

February 26, 2021

Quarterly Statement Q1 2021 / Annual Shareholders' Meeting 2021

April 29, 2021

Half-Year Financial Report 2021

July 28, 2021

Quarterly Statement Q3 2021

October 27, 2021

Further information

Published on July 29, 2020 You can find this and other BASF publications online at basf.com/publications

Contact

General inquiries Phone: +49 621 60-0, email: [email protected]

Media Relations Jens Fey, phone: +49 621 60-99123

Investor Relations Dr. Stefanie Wettberg, phone: +49 621 60-48002

Internet basf.com

Forward-looking statements and forecasts

This half-year financial report contains forward-looking statements. These statements are based on current estimates and projections of the Board of Executive Directors and currently available information. Forward-looking statements are not guarantees of the future developments and results outlined therein. These are dependent on a number of factors; they involve various risks and uncertainties; and they are based on assumptions that may not prove to be accurate. Such risk factors include those discussed in Opportunities and Risks on pages 139 to 147 of the BASF Report 2019. The BASF Report is available online at basf.com/report. We do not assume any obligation to update the forward-looking statements contained in this half-year financial report above and beyond the legal requirements.

BASF supports the chemical industry's global Responsible Care initiative. COMC 2010 E

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BASF SE

44_10-q_2020-07-31_a01de9bd-0e7e-443c-97ff-6ca363e7e52a.pdf

Half-Year Financial Report 2020

BASF Group Q2 2020: EBIT before special items declines due to weaker demand as a result of the corona pandemic

On the cover:

Information on Q2 2020 11

Key Figures BASF Group H1 2020

Consolidated Interim Management's Report 2020 Significant Events

Results of Operations

Factors influencing BASF Group sales in H1 2020

H1 EBITDA before special items

H1 EBITDA

Segment sales and EBIT before special items

Net Assets and Financial Position

Net assets

Financial position

Net debt

H1 free cash flow

Economic Environment and Outlook

BASF Group

Information on Q2 2020 BASF Group Q2 sales

Factors influencing BASF Group sales in Q2 2020

Q2 EBIT before special items

Q2 EBITDA before special items

Q2 EBITDA

Q2 adjusted earnings per share

Q2 free cash flow

Chemicals

Q2 2020

Factors influencing sales in Q2 2020 – Chemicals

Segment data – Chemicals

Materials

Q2 2020

Segment data – Materials

Factors influencing sales in Q2 2020 – Materials

Industrial Solutions

Q2 2020

Segment data – Industrial Solutions

Factors influencing sales in Q2 2020 – Industrial Solutions

Surface Technologies

Q2 2020

Factors influencing sales in Q2 2020 – Surface Technologies

Nutrition & Care

Q2 2020

Factors influencing sales in Q2 2020 – Nutrition & Care

Segment data – Nutrition & Care

Agricultural Solutions

Q2 2020

Factors influencing sales in Q2 2020 – Agricultural Solutions

Segment data – Agricultural Solutions

H1 2020 sales by indication and sector

Other

Q2 2020

Regions

Q2 2020

Regions

Statement of Income

Condensed Consolidated Half-Year Financial Statements 2020

Statement of Income

Statement of Income and Expense Recognized in Equity

Development of income and expense recognized in equity attributable to shareholders of BASF SE

Balance Sheet

Equity and liabilities

Statement of Cash Flows

Statement of Changes in Equity

H1 2019

Segment Reporting

Other in H1d

Notes to the Consolidated Half-Year Financial Statements

1 Basis of presentation

Accounting policies applied for the first time in 2020

Amendments to References to the Conceptual Framework in IFRS Standards

Amendments to IAS 1 – Financial Statement Presentation and IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors

Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest Rate Benchmark Reform

Amendments to IFRS 3 – Business Combinations

2 Scope of consolidation

Scope of consolidation

Companies accounted for using the equity method

Notes to the Consolidated Half-Year Financial Statements