Interim / Quarterly Report • Jul 30, 2009
Interim / Quarterly Report
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January – June 2009 Published on July 30, 2009
| 2nd Quarter | 1st Half | |||||
|---|---|---|---|---|---|---|
| 2009 | 2008 | Change in % | 2009 | 2008 | Change in % | |
| Sales | 12,502 | 16,305 | (23.3) | 24,721 | 32,226 | (23.3) |
| Income from operations before depreciation and amortization (EBITDA) | 1,576 | 3,033 | (48.0) | 3,163 | 5,988 | (47.2) |
| Income from operations (EBIT) before special items | 1,140 | 2,408 | (52.7) | 2,125 | 4,762 | (55.4) |
| Income from operations (EBIT) | 772 | 2,359 | (67.3) | 1,700 | 4,662 | (63.5) |
| Financial result | (59) | (38) | (55.3) | (261) | (160) | (63.1) |
| Income before taxes and minority interests | 713 | 2,321 | (69.3) | 1,439 | 4,502 | (68.0) |
| Net income | 343 | 1,297 | (73.6) | 718 | 2,467 | (70.9) |
| Earnings per share (€) | 0.37 | 1.39 | (73.4) | 0.78 | 2.63 | (70.3) |
| Adjusted earnings per share (€) 1 | 0.79 | 1.54 | (48.7) | 1.34 | 2.92 | (54.1) |
| EBITDA margin | 12.6 | 18.6 | – | 12.8 | 18.6 | – |
| Cash provided by operating activities | 1,563 | 1,540 | 1.5 | 3,647 | 2,629 | 38.7 |
| Additions to intangible assets and property, plant and equipment | 4,390 | 590 | 4,915 | 1,013 | 385.2 | |
| Excluding acquisitions | 737 | 590 | 24.9 | 1,262 | 1,013 | 24.6 |
| Amortization and depreciation 2 | 804 | 674 | 19.3 | 1,463 | 1,326 | 10.3 |
| Segment assets (June 30) 3 | 41,794 | 38,185 | 9.5 | – | – | – |
| Personnel costs | 1,793 | 1,621 | 10.6 | 3,335 | 3,162 | 5.5 |
| Number of employees (June 30) | 106,667 | 95,664 | 11.5 | – | – | – |
1 See page 33 for explanation
2 Intangible assets and property, plant and equipment (including acquisitions)
3 Intangible assets, property, plant and equipment, inventories and business-related receivables
| BASF Group Business Review 01 | |
|---|---|
| BASF on the Capital Market 05 | |
| Significant Events and Economic Environment 06 | |
| Chemicals 07 | |
| Plastics 08 | |
| Performance Products 09 | |
| Functional Solutions 10 | |
| Agricultural Solutions 11 | |
| Oil & Gas 12 | |
| Regions 13 | |
| Overview of Other Topics 14 | |
| Outlook 15 |
| Consolidated Statements of Income 16 | |
|---|---|
| Consolidated Balance Sheets 17 | |
| Consolidated Statements of Cash Flows 18 | |
| Consolidated Statements of Recognized Income | |
| and Expense 19 | |
| Consolidated Statements of Stockholder's Equity 20 | |
| Segment Reporting 21 | |
| Notes to the Interim Financial Statements 23 | |
| Calculation of the adjusted earnings per share 33 | |
| Statement in accordance with Section 37y | |
| and Section 37w para. 2 No. 3 of the German | |
| Securities Trading Act 33 | |
The cover photo shows Astrid Schmidt and Torsten Zorn (laboratory assistants) at BASF's research and service center for detergents and formulators in Ludwigshafen.
In the Chemicals segment, we offer products for customers in the chemical, electronic, construction, textile, automotive, pharmaceutical and agricultural industries and provide other BASF segments with chemicals for the production of higher-value products. Our portfolio ranges from basic chemicals, glues and electronic chemicals for the semiconductor and flat panel display industry, to solvents and plasticizers as well as starting materials for detergents, plastics, textile fibers, paints, coatings and pharmaceuticals.
The Plastics segment offers a comprehensive range of products, system solutions and services. We offer a variety of engineering plastics for the automotive and electric industries as well as for use in household appliances, sport and leisure. Our styrenic foams are used as insulating materials in the construction industry and in the packaging industry. Our polyurethanes are extremely versatile: as soft foams, for example, they are to be found in car seats and mattresses, and as rigid foams they serve as highly efficient insulation in refrigerators.
Our Performance Products help our customers improve their products and processes. They are found in countless everyday products: from diapers, paper, vitamins for food supplements and light stabilizers for sun creams to products for the oil, automotive, coatings and plastics industries and for the manufacture of leather and textiles. The acquisition of Ciba strengthens our existing business, while also adding plastic additives, water treatment products and mining applications to our portfolio.
In the Functional Solutions segment we bundle system solutions and innovative products for specific customers and industries, in particular for the automotive and construction sectors. Our portfolio comprises automotive and industrial catalysts, automotive and industrial coatings, concrete admixtures and building products such as tile adhesives and architectural coatings.
Our crop protection products guard against fungal diseases, insects and weeds, increase quality and secure crop yields. Our research in plant biotechnology concentrates on plants for greater efficiency in agriculture, healthier nutrition and for use as renewable raw materials.
oil & gas PAGE 12
As the largest German producer of oil and gas, we focus our exploration and production in oil and gas-rich regions in Europe, North Africa, South America, Russia and the Caspian Sea region. Together with our Russian partner Gazprom, we are active in the trading, transport and storage of natural gas in Europe.
The Antares DLR-H2 motor glider is the first manned aircraft to be powered exclusively by hydrogen. The fuel cell system that makes this possible is hidden in the under-wing pods. Here the electricity for the on-board electronics and electric motor is generated. The heart of the system are membrane electrode assemblies developed by BASF Fuel Cell.
The Antares DLR-H2 was built by the German Aerospace Center (DLR) and the Lange Aviation company to test the fuel cell's potential for aviation applications. BASF is participating in the pilot project to promote an innovative energy technology which will really be taking off in the near future, and not just on board aircrafts. In times of scarce energy resources the fuel cell helps maintain security of supply because hydrogen can be generated in a wide variety of ways: using wind or solar energy and from natural gas or diesel. The only waste gas the fuel cell emits is water vapor. It is also much more efficient than conventional energy technologies. With approximately the same weight, Antares can fly 750 kilometers with a fuel cell and only around 100 kilometers with a battery.
In the membrane electrode assemblies (MEAs) developed by BASF Fuel Cell, chemical energy generated by the reaction between oxygen and hydrogen into water is converted directly into electrical power. Marketed under the brand name Celtec® , the MEAs contain the world's first commercially available membrane for fuel cells that allows operating temperatures of up to 180°C. To make a fuel cell system capable of producing sufficient electricity for powering the Antares motor glider, several cells are combined into a fuel cell stack. The challenge facing the developers is to keep the fuel cell system as lightweight as possible.
The project partners presented the Antares DLR-H2 motor glider to the public during the first official flight at the Hamburg-Fuhlsbüttel airport on July 7.
Several cells are combined to form a fuel stack.
Collaboration with research institutes, colleges, start-up companies and other companies
Around 1,900 Our products and system solutions help companies from practically all industries to increase their innovative power and thus lay the foundations for future growth.
In the face of the worldwide economic crisis, the BASF Group's sales and earnings in the second quarter of 2009 were significantly lower than in the second quarter of 2008. Sales fell by 23% to €12.5 billion. Income from operations (EBIT) before special items dropped by 53% to €1,140 million due to a continued low level of demand as well as declining prices. Agricultural Solutions was again able to slightly increase the high level of the previous year's second quarter. Compared with the first quarter of 2009, Chemicals, Plastics and Functional Solutions improved earnings. Our programs to improve efficiency and cut costs are making an impact.
Sales volumes in the second quarter of 2009 were considerably lower than in the same quarter of 2008. Prices also fell in almost all segments, with only Agricultural Solutions again recording slightly higher prices. Currency effects, in particular the appreciation of the U.S. dollar, reduced the decline in sales in euro terms in all operating divisions. Excluding these positive currency effects and the acquisition of Ciba, sales fell by 31%.
| 2nd Quarter | |
|---|---|
| Volumes | (18) |
| Prices | (13) |
| Acquisitions/divestitures | 5 |
| Currencies | 3 |
| (23) |
All divisions in the Chemicals segment recorded a substantial decline in sales due to lower volumes and prices. Plant utilization levels were low, especially in Europe and North America. Although earnings declined substantially compared with the same quarter of the previous year, they
improved in all divisions compared with the first quarter of 2009.
Sales in the Plastics segment fell significantly due to weak demand from almost all customer industries; earnings were halved. In contrast to the first quarter of 2009, earnings in both divisions were positive thanks to our strict cost management.
2nd quarter sales (million €)
| Chemicals | 2009 | 1,809 | (41%) |
|---|---|---|---|
| 2008 | 3,081 | ||
| Plastics | 2009 | 1,750 | (30%) |
| 2008 | 2,495 | ||
| Performance | 2009 | 2,443 | 17% |
| Products | 2008 | 2,081 | |
| Functional | 2009 | 1,755 | (30%) |
| Solutions | 2008 | 2,490 | |
| Agricultural | 2009 | 1,175 | 1% |
| Solutions | 2008 | 1,159 | |
| Oil & Gas | 2009 | 2,452 | (23%) |
| 2008 | 3,201 | ||
| Other | 2009 | 1,118 | (38%) |
| 2008 | 1,798 |
In the Performance Products segment, sales increased considerably as a result of the acquisition of Ciba. Despite lower fixed costs and higher margins, overall earnings declined significantly. This was mainly due to the fact that the acquired Ciba businesses posted a significant loss due to the tough business environment and integration costs.
As a result of the continued weak demand in the automotive industry, there was a substantial decrease in sales in Functional Solutions. This particularly affected the Catalysts division, which was additionally affected by a signifi-
cant decline in precious metal prices. The segment's earnings fell substantially compared with the same quarter of the previous year, however following a loss in the first quarter of 2009, were again positive. In Construction Chemicals, we increased earnings compared with the second quarter of 2008 due to the reduction of fixed costs.
In Agricultural Solutions, sales were only slightly higher than in the second quarter of 2008 as a result of delayed planting in North America and parts of Europe. Our business with crop protection agents in South America declined, partly due to the severe drought in Argentina. The segment's earnings rose slightly, to some extent due to positive currency effects.
The sharp decline in oil prices and lower natural gas volumes were responsible for the significant drop in sales and earnings in the Oil & Gas segment compared with the second quarter of 2008. As a result of the delayed adjustment of sales prices to purchase prices, we recorded slightly higher margins in the Natural Gas Trading business sector, but this was not sufficient in order to compensate for the decline in volumes.
Sales in Other decreased due to lower demand in Styrenics and Fertilizers. Styrenics recorded higher earnings thanks to improved margins and reduced fixed costs. Overall however, earnings declined, the main reasons for this being currency losses as well as expenses from the BASF option program due to the higher share price. In the same quarter of the previous year, a high level of unrealized earnings from raw materials hedging was recorded.
Special items of minus €368 million (second quarter of 2008: minus €49 million) primarily arose from the integration of Ciba, among other things as a result of the use of inventory revalued at market prices at the time of the acquisition and of the partial writedown of the Ciba IT system.
| Chemicals | 2009 | 258 | (32%) | |
|---|---|---|---|---|
| 2008 | 377 | |||
| Plastics | 2009 | 138 | (52%) | |
| 2008 | 285 | |||
| Performance | 2009 | 80 | (64%) | |
| Products | 2008 | 221 | ||
| Functional | 2009 | 48 | (57%) | |
| Solutions | 2008 | 111 | ||
| Agricultural | 2009 | 367 | 1% | |
| Solutions | 2008 | 363 | ||
| Oil & Gas | 2009 | 506 | (51%) | |
| 2008 | 1.026 | |||
| Other | 2009 | (257) | .% | |
| 2008 | 25 | |||
Compared with the second quarter of 2008, EBIT dropped 67% to €772 million, while EBITDA decreased by 48% to €1,576 million.
At minus €59 million, the financial result was €21 million lower than in the second quarter of 2008 due to higher interest expenses. Earnings from investments consolidated using the equity method improved considerably.
Income before taxes and minority interests fell 69% in the second quarter to €713 million. At 51%, the tax rate was higher than in the second quarter of 2008 due to the higher proportion of earnings from oil and gas production. Net income decreased by 74% to €343 million.
Earnings per share were €0.37 in the second quarter compared with €1.39 in the same period of 2008. Adjusted for special items and amortization of intangible assets, this amounted to €0.79 (second quarter of 2008: €1.54).
See page 33 for the calculation of the adjusted earnings per share
| 2009 | 2008 | |
|---|---|---|
| 1st quarter | (57) | (51) |
| 2nd quarter | (368) | (49) |
| 1st half | (425) | (100) |
| 3rd quarter | (59) | |
| 4th quarter | (234) | |
| Full year | (393) |
| 2009 | 2008 | |
|---|---|---|
| 1st quarter | 0.55 | 1.38 |
| 2nd quarter | 0.79 | 1.54 |
| 1st half | 1.34 | 2.92 |
| 3rd quarter | 0.96 | |
| 4th quarter | (0.05) | |
| Full year | 3.85 |
In the first half of 2009 our business was shaped by the worldwide recession. At €24.7 billion, sales were 23% lower than the record level achieved in the same period of the previous year. All divisions except for Agricultural Solutions were affected by this development. Income from operations before special items fell by 55% to €2,125 million.
Volumes decreased in all divisions in the first half of 2009. Prices also declined as a whole, particularly in the Chemicals, Plastics and Functional Solutions segments. Currency effects, in particular the appreciation of the U.S. dollar, partially reduced the decline in sales in euro terms in all operating divisions. Excluding these positive currency effects and the acquisition of Ciba, sales fell by 28%.
| Factors influencing sales (% of sales) | |
|---|---|
| 1st Half | |
| Volumes | (19) |
| Prices | (9) |
| Acquisitions/divestitures | 2 |
| Currencies | 3 |
| (23) |
As a result of falling volumes and prices, the Chemicals segment recorded a substantial decrease in sales compared with the same period of the previous year. Production capacities were adjusted to reflect worldwide demand. The segment's earnings fell even more sharply than sales as a result of the low capacity utilization rates at our plants. Nevertheless, all divisions contributed towards the positive earnings.
The Plastics segment also recorded a significant decline in sales compared with the same period of the previous year. Both operating divisions posted lower volumes and lower prices. Although the segment's earnings were considerably lower than in the first half of 2008, we have achieved a continuous improvement since the fourth quarter of 2008. Despite reduced fixed costs, earnings in the Performance Polymers division still remained negative.
Sales in the Performance Products segment were at the same level as in the first half of 2008. This was due to the inclusion of the Ciba businesses in the second quarter of 2009. At the same time, the segment's earnings were significantly impacted by low demand in the Ciba business and high integration expenses. In contrast, earnings in Care Chemicals decreased only slightly compared with the first half of 2008 and made a major contribution to the segment's positive earnings.
The weak demand in the automotive industry and the sharp decline in precious metal prices led to a substantial decrease in sales in Functional Solutions compared with the first half of 2008. This development particularly affected the Catalysts division where sales were almost halved. Nevertheless, our measures to cut costs and increase efficiency helped to make the segment's earnings again overall positive in the second quarter of 2009.
We recorded higher sales in the Agricultural Solutions segment. This was mainly due to higher volumes and prices in the first quarter. The Sorex Group business acquired at the end of 2008 has been successfully integrated. The segment's earnings rose, mainly thanks to improved margins and positive currency effects.
Sales declined slightly in the Oil & Gas segment, primarily due to the significant fall in oil prices. Gas production increased thanks to additional volumes from the Yuzhno Russkoye gas field, while oil production declined. Earnings did not reach the high level recorded in the first half of 2008 as a result of the lower oil price.
Sales in Other decreased significantly, primarily due to lower demand in Styrenics and Fertilizers. Styrenics was able to increase earnings as a result of improved margins and reduced fixed costs. Primarily currency losses meant that earnings were substantially lower than in the same period of the previous year, which contained high unrealized earnings from raw materials hedging.
Special items of minus €425 million (second half of 2008: minus €100 million) were particularly related to the integration of Ciba, among other things as a result of the use of inventory revalued at market prices at the time of the acquisition and the partial writedown of the Ciba IT system.
| Chemicals | 2009 | 342 | (62%) | |
|---|---|---|---|---|
| 2008 | 909 | |||
| Plastics | 2009 | 109 | (83%) | |
| 2008 | 637 | |||
| Performance | 2009 | 203 | (53%) | |
| Products | 2008 | 430 | ||
| Functional Solutions |
2009 | 2 | (99%) | |
| 2008 | 251 | |||
| Agricultural | 2009 | 711 | 14% | |
| Solutions | 2008 | 622 | ||
| Oil & Gas | 2009 | 1,231 | (39%) | |
| 2008 | 2,010 | |||
| Other | 2009 | (473) | .% | |
| 2008 | (97) | |||
Compared with the first half of 2008, EBIT dropped 64% to €1,700 million, while EBITDA decreased by 47% to €3,163 million.
At minus €261 million, the financial result was €101 million lower than in the first half of 2008 due to the decline in the interest result. Earnings from investments consolidated using the equity method improved considerably.
Income before taxes and minority interests fell by 68% to €1,439 million. At 44%, the tax rate was higher than in the first half of 2008 due to the higher proportion of income from the oil and gas business. Net income decreased by 71% to €718 million.
Earnings per share were €0.78 in the first half of 2009 compared with €2.63 in the same period of 2008. Earnings per share adjusted for special items and amortization of intangible assets amounted to €1.34 (first half of 2008: €2.92).
See page 33 for the calculation of the adjusted earnings per share
| 2nd Quarter 2009 | 1st Half 2009 | ||
|---|---|---|---|
| Performance (with dividends reinvested) | |||
| Investment in BASF shares | % | 32.7 | 9.0 |
| DAX 30 | % | 17.7 | 0.0 |
| DJ EURO STOXX 50 | % | 19.0 | (0.8) |
| DJ Chemicals | % | 24.0 | 15.5 |
| MSCI World Chemicals | % | 15.3 | 15.6 |
| Share prices and trading (XETRA) | |||
| Average | € | 28.52 | 26.10 |
| High | € | 31.90 | 31.90 |
| Low | € | 22.79 | 20.71 |
| Close (end of period) | € | 28.33 | 28.33 |
| Average daily trade | Million shares | 5.59 | 5.74 |
| Outstanding shares (end of period) | Million shares | 918.5 | 918.5 |
| Market capitalization (end of period) | Billion € | 26.0 | 26.0 |
BASF shares closed the second quarter at €28.33 per share, around 24% higher than at the end of the first quarter. With reinvestment of the dividend of €1.95 per share distributed on May 4, our share performance in the second quarter amounted to around 33%. As a result, BASF shares outperformed the German and European stock markets, the key indices of which – DAX 30 and DJ EURO STOXX 50 – rose by approximately 18% and 19%, respectively, over the same period. In the second quarter, BASF shares also outperformed the global industry indices DJ Chemicals and MSCI World Chemicals, which increased by 24% and 15%, respectively.
Up-to-date information on BASF shares is available on the Internet at basf.com/share
With an "A+/A-1/outlook negative" rating from rating agency Standard & Poor's and "A1/P-1/outlook stable" from Moody's, BASF has good credit ratings compared with its competitors in the chemical industry. In the second quarter of 2009, BASF issued a euro bond worth €1.35 billion with a coupon of 3.75% and also increased an outstanding euro bond by €500 million.
See page 32 for information on financial indebtedness and its maturities
In June, BASF obtained for the third time in succession the Investor Relations Award presented by business magazine Capital. In this ranking, around 400 analysts and fund managers ranked BASF first among EURO STOXX 50 companies. BASF also took first place in the chemical sector in the Pan-European IR Excellence Awards 2009 presented by Thomson Extel.
Ciba Holding AG and BASF Specialty Chemicals Holding GmbH merged at the end of June 2009. For Ciba shares that were still outstanding, BASF paid cash compensation of CHF 50.00 per share. BASF has thus fully taken over Ciba.
The integration of the Ciba businesses acquired in April into the divisions of the Performance Products segment involves extensive restructuring. The paper business of Ciba and BASF will be combined in the newly established Paper Chemicals division. All of Ciba's Coatings Effects activities will be integrated into the Dispersions & Pigments division. All of Ciba's Plastic Additives business and the majority of its Water Treatment business will be integrated into the Performance Chemicals division. Ciba's Home & Personal Care business will be integrated into the existing structure of the Care Chemicals division.
The company will retain a strong presence in the Basel region: The Paper Chemicals division formed in April has been based in Basel since July 1, 2009. In addition, the European business unit for plastic additives and the global units responsible for technology management and the restructuring of the pigments business will also be located there. Furthermore, a new Business Center for sales, finance and human resources in Switzerland as well as a research center for coatings and printable electronics will be based in Basel.
Further details on the integration of Ciba can be found on page 15 and in the Notes on page 24
At the beginning of July 2009, the Chinese central government approved the Joint Feasibility Study Report submitted by BASF and Sinopec for the expansion of their joint chemical site in Nanjing. The site is operated by the joint venture BASF-YPC Co. Ltd. BASF and Sinopec will invest around \$1.4 billion in increasing the capacity of the Verbund site, expanding the steam cracker, constructing 10 new plants and expanding three existing plants. The expansion will take place in stages. The majority of the new plants, which will produce higher value specialty chemicals for the Chinese market, will start operations from 2011 onwards.
At the end of June 2009, BASF closed down a polystyrene plant at its Ludwigshafen site due to the continued decline in demand. As a result, BASF has reduced its production capacity for this standard plastic in Europe by around 15%. Polystyrene will continue to be produced in Ludwigshafen, but primarily for the manufacture of the two insulation materials Styrodur® C und Neopor®.
In addition, BASF will close its Styropor® plant at the Tarragona/Spain site in August 2009.
In mid-2009, the global economy is in a deep recession. Following the sharp drop in economic performance in the fourth quarter of 2008, the global downturn further intensified in the first quarter of 2009. Although the economic environment remained difficult in the second quarter of 2009, the indications are that the situation is stabilizing at a low level.
Compared with the same period of the previous year, the global gross domestic product in the first half of the year shrank by around 4%. This development particularly affected industrial countries that are highly dependent on the automotive industry or construction sector. Worldwide industrial production dropped by around 13%.
We have therefore adjusted the underlying assumptions on which our forecast for 2009 is based.
The forecast for full year 2009 can be found on page 15
• Extensive restructuring of the Ciba businesses during integration into the Performance Products segment; Basel remains a key site
6
| 2nd Quarter | 1st Half | |||||
|---|---|---|---|---|---|---|
| 2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
|
| Sales to third parties | 1,809 | 3,081 | (41) | 3,365 | 5,844 | (42) |
| Thereof Inorganics | 235 | 341 | (31) | 458 | 672 | (32) |
| Petrochemicals | 1,127 | 2,084 | (46) | 2,037 | 3,841 | (47) |
| Intermediates | 447 | 656 | (32) | 870 | 1,331 | (35) |
| Income from operations before depreciation and amortization (EBITDA) | 419 | 528 | (21) | 657 | 1,204 | (45) |
| Income from operations (EBIT) before special items | 258 | 377 | (32) | 342 | 909 | (62) |
| Income from operations (EBIT) | 258 | 377 | (32) | 341 | 909 | (62) |
| Assets | 5,817 | 6,861 | (15) | – | – | – |
| Research expenses | 32 | 36 | (11) | 66 | 72 | (8) |
| Additions to property, plant and equipment and intangible assets | 111 | 183 | (39) | 213 | 274 | (22) |
Compared with the same quarter of the previous year, sales in the Chemicals segment declined substantially as a result of falling volumes and prices (volumes –21%, prices –24%, portfolio 0%, currencies 4%). As a result of very weak demand and low capacity utilization rates at our plants, income from operations before special items decreased significantly. However, all divisions recorded higher earnings than in the first quarter of 2009. Our measures to cut costs and optimize production processes contributed to this.
The Inorganics division recorded a substantial decline in sales compared with the second quarter of 2008. This was due to lower business volumes in nearly all product lines as well as falling prices for methanol, urea and ammonia. Income from operations before special items fell due to weak volumes and lower margins.
The continued low level of demand and the significant decline in prices led to a sharp drop in sales in the Petrochemicals division compared with the second quarter of 2008. In Europe and North America in particular, the utilization rates at our plants were low. At the Ludwigshafen site, we temporarily shut down a steam cracker. Income from operations before special items was significantly lower than in the second quarter of 2008, mainly due to lower volumes. However, we recorded an increase in earnings compared with the first quarter of 2009.
In the Intermediates division, sales decreased substantially compared with the second quarter of 2008 due to lower volumes, particularly due to the weak demand from the textiles, coatings and plastics industries. In Asia, business developed positively compared with the first quarter of 2009 in several product lines. Thanks to falling raw material prices, margins improved slightly compared with the same period of the previous year. Income from operations before special items decreased significantly due to lower volumes.
2nd QUARTER 2009 Change compared with 2nd quarter 2008
SALES EBIT
–41% –32%
before special items
| 2nd Quarter | 1st Half | |||||
|---|---|---|---|---|---|---|
| 2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
|
| Sales to third parties | 1,750 | 2,495 | (30) | 3,213 | 4,885 | (34) |
| Thereof Performance Polymers | 750 | 1,100 | (32) | 1,347 | 2,164 | (38) |
| Polyurethanes | 1,000 | 1,395 | (28) | 1,866 | 2,721 | (31) |
| Income from operations before depreciation and amortization (EBITDA) | 247 | 380 | (35) | 325 | 826 | (61) |
| Income from operations (EBIT) before special items | 138 | 285 | (52) | 109 | 637 | (83) |
| Income from operations (EBIT) | 139 | 285 | (51) | 109 | 636 | (83) |
| Assets | 4,522 | 5,308 | (15) | – | – | – |
| Research expenses | 32 | 35 | (9) | 64 | 67 | (4) |
| Additions to property, plant and equipment and intangible assets | 64 | 111 | (42) | 127 | 183 | (31) |
Our business in the Plastics segment was shaped by the worldwide recession in our customer industries. As a result of lower volumes and lower prices, sales were substantially lower than in the second quarter of 2008 (volumes –19%, prices –15%, portfolio 0%, currencies 4%). Income from operations before special items was halved. In contrast to the first quarter of 2009, both operating divisions recorded positive earnings. This was due to our successful cost management and a slight recovery in demand, especially in Asia.
The Performance Polymers division recorded a sharp drop in sales compared with the second quarter of 2008 due to lower volumes and prices, especially in business with the automotive and electronics industries. As in the first quarter of 2009, the business environment remained weak, with the exception of a slight recovery in Asia. The large decline in sales prices was only partially offset by lower raw material costs. Income from operations before special items
was nevertheless positive, but was considerably lower than in the second quarter of 2008. Fixed costs were reduced significantly.
In the Polyurethanes division, sales decreased substantially compared with the second quarter of 2008. This development was due to a considerable decline in business volumes in all regions as well as general falling prices. Continued weak demand in the construction and automotive industries resulted in overcapacities for basic products. Income from operations before special items was much lower than the excellent figure achieved in the second quarter of 2008, but higher than in the first quarter of 2009. We continued to impose strict cost management and reduced inventories.
SALES EBIT
–30% –52%
before special items
Innovative and high-growth specialties
| 2nd Quarter | 1st Half | |||||||
|---|---|---|---|---|---|---|---|---|
| 2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
|||
| Sales to third parties | 2,443 | 2,081 | 17 | 4,120 | 4,085 | 1 | ||
| Thereof Dispersions & Pigments | 559 | 651 | (14) | 1,031 | 1,244 | (17) | ||
| Care Chemicals | 767 | 912 | (16) | 1,565 | 1,800 | (13) | ||
| Paper Chemicals | 195 | 246 | (21) | 392 | 498 | (21) | ||
| Performance Chemicals | 216 | 272 | (21) | 426 | 543 | (22) | ||
| Ciba | 706 | – | – | 706 | – | – | ||
| Income from operations before depreciation and amortization (EBITDA) | 6 | 339 | (98) | 222 | 650 | (66) | ||
| Income from operations (EBIT) before special items | 80 | 221 | (64) | 203 | 430 | (53) | ||
| Income from operations (EBIT) | (214) | 244 | (91) | 461 | ||||
| Assets | 10,131 | 5,693 | 78 | – | – | – | ||
| Research expenses | 77 | 55 | 40 | 126 | 109 | 16 | ||
| Additions to property, plant and equipment and intangible assets | 3,779 | 75 | 3,853 | 136 |
Sales increased as a result of the inclusion of the Ciba businesses (volumes –18%, prices –3%, portfolio 33%, currencies 5%). While volumes declined significantly, margins increased in almost all product lines and fixed costs were reduced. The acquired Ciba businesses had a negative impact on income from operations before special items. Negative special items arose, mostly from the use of inventory revalued at market prices at the time of acquisition and from the partial writedown of the Ciba IT system.
While prices remained largely stable, sales in the Dispersions & Pigments division were lower than in the second quarter of 2008 due to a decline in volumes. Earnings decreased only slightly, primarily due to improved margins.
Weaker demand in Care Chemicals led to a decline in sales, for example in products for detergents and formulators. Earnings were only slightly lower than in the second
quarter of 2008. This division therefore made a key contribution to the segment's earnings.
The Paper Chemicals division recorded a substantial decrease in demand compared with the same quarter of the previous year. Thanks to improved margins, we were able to achieve positive earnings despite the difficult business environment.
Performance Chemicals recorded a significant decline in sales, primarily due to lower volumes. Despite stable margins and falling costs, earnings were substantially lower than in the second quarter of 2008. The loss posted in the first quarter of 2009 was almost offset by positive earnings in the second quarter.
The businesses acquired from Ciba are reported as a separate division in the second quarter. In a difficult business environment, earnings were negative despite massive measures to reduce costs.
2nd QUARTER 2009 Change compared with 2nd quarter 2008
SALES EBIT
before special items
+17% –64%
Customer-specific products and system solutions
| 2nd Quarter | 1st Half | ||||||
|---|---|---|---|---|---|---|---|
| 2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
||
| Sales to third parties | 1,755 | 2,490 | (30) | 3,323 | 4,884 | (32) | |
| Thereof Catalysts | 677 | 1,265 | (46) | 1,328 | 2,578 | (48) | |
| Construction Chemicals | 536 | 563 | (5) | 984 | 1,018 | (3) | |
| Coatings | 542 | 662 | (18) | 1,011 | 1,288 | (22) | |
| Income from operations before depreciation and amortization (EBITDA) | 129 | 193 | (33) | 176 | 420 | (58) | |
| Income from operations (EBIT) before special items | 48 | 111 | (57) | 2 | 251 | (99) | |
| Income from operations (EBIT) | 29 | 108 | (73) | (16) | 245 | ||
| Assets | 8,227 | 8,811 | (7) | – | – | – | |
| Research expenses | 42 | 47 | (11) | 86 | 94 | (9) | |
| Additions to property, plant and equipment and intangible assets | 40 | 36 | 11 | 76 | 82 | (7) |
Sales were substantially lower than in the second quarter of 2008 due to declining demand and lower prices (volumes –22%, prices –11%, portfolio 0%, currencies 3%). Income from operations before special items dropped sharply, primarily as a result of the lower volume of business. Our measures to increase efficiency helped us to post positive earnings again, following a loss in the first quarter of 2009.
In Catalysts, sales fell dramatically as a result of weak demand from the automotive and chemicals industries and a significant decline in precious metal prices. Precious metal trading contributed €261 million to sales (second quarter of 2008: €628 million). Adjusted for this, sales declined by around 35%. Our refinery catalysts business posted higher sales. The overall substantial decline in business volumes had a detrimental effect on earnings, which were negative despite lower fixed costs.
In the Construction Chemicals division, the usual seasonal upturn in demand was subdued, especially in Europe and North America. Despite positive business development in Asia and the Middle East, sales did not quite reach the level recorded in the same quarter of the previous year. With slightly improved margins, income from operations before special items were higher thanks to our measures to reduce fixed costs. The loss in the first quarter of 2009 was offset.
In the Coatings division, there was a substantial decline in sales due to lower volumes. The demand for automotive and industrial coatings was dramatically lower than in the second quarter of 2008. The drastic decline in earnings was dampened by stable margins, and lower fixed costs resulting from restructuring measures. The division again recorded positive earnings, following a loss in the first quarter of 2009.
2nd QUARTER 2009 Change compared with 2nd quarter 2008
SALES EBIT
before special items
–30% –57%
Development of innovative active ingredients and solutions for plant health
| 2nd Quarter | 1st Half | ||||||
|---|---|---|---|---|---|---|---|
| 2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
||
| Sales to third parties | 1,175 | 1,159 | 1 | 2,320 | 2,105 | 10 | |
| Income from operations before depreciation and amortization (EBITDA) | 415 | 422 | (2) | 803 | 728 | 10 | |
| Income from operations (EBIT) before special items | 367 | 363 | 1 | 711 | 622 | 14 | |
| Income from operations (EBIT) | 366 | 363 | 1 | 706 | 622 | 14 | |
| Assets | 5,118 | 4,631 | 11 | – | – | – | |
| Research expenses | 86 | 82 | 5 | 167 | 154 | 8 | |
| Additions to property, plant and equipment and intangible assets | 66 | 19 | 247 | 111 | 45 | 147 |
Sales were slightly increased compared with the second quarter of 2008 despite delayed planting in North America and in parts of Europe. Higher prices in North America and Europe in particular for fungicides and herbicides, positive currency effects as well as the inclusion of the Sorex Group, more than compensated for a decline in volumes (volumes –10%, prices 7%, portfolio 1%, currencies 3%). We slightly exceeded the good earnings figure for the second quarter of 2008. Higher expenses for distribution as well as for research and development were more than offset by positive currency effects.
Sales decreased in Europe. In particular, the delayed start to the season for cereals and canola (oilseed rape) led to a decline in the use of our fungicides.
We increased sales further in North America. However, demand for our plant health products (Headline®) was reduced by weather conditions.
Sales in Asia increased moderately, primarily due to our business in China.
Sales in South America declined slightly due to the severe drought in Argentina. Moreover, we are observing that our customers are increasingly ordering our products shortly before they intend to use them.
Change compared with 2nd quarter 2008
+1% +1%
| Segment data (million €) | ||||||
|---|---|---|---|---|---|---|
| 2nd Quarter | 1st Half | |||||
| 2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
|
| Sales to third parties | 2,452 | 3,201 | (23) | 6,346 | 6,945 | (9) |
| Thereof Exploration & Production | 946 | 1,388 | (32) | 1,983 | 2,771 | (28) |
| Natural Gas Trading | 1,506 | 1,813 | (17) | 4,363 | 4,174 | 5 |
| Income from operations before depreciation and amortization (EBITDA) | 625 | 1,167 | (46) | 1,464 | 2,285 | (36) |
| Thereof Exploration & Production | 552 | 1,086 | (49) | 1,100 | 1,996 | (45) |
| Natural Gas Trading | 73 | 81 | (10) | 364 | 289 | 26 |
| Income from operations (EBIT) before special items | 506 | 1,026 | (51) | 1,231 | 2,010 | (39) |
| Thereof Exploration & Production | 469 | 980 | (52) | 940 | 1,792 | (48) |
| Natural Gas Trading | 37 | 46 | (20) | 291 | 218 | 33 |
| Income from operations (EBIT) | 506 | 1,026 | (51) | 1,231 | 2,010 | (39) |
| Thereof Exploration & Production | 469 | 980 | (52) | 940 | 1,792 | (48) |
| Natural Gas Trading | 37 | 46 | (20) | 291 | 218 | 33 |
| Assets | 7,979 | 6,881 | 16 | – | – | – |
| Thereof Exploration & Production | 4,942 | 4,060 | 22 | – | – | – |
| Natural Gas Trading | 3,037 | 2,821 | 8 | – | – | – |
| Exploration expenses | 31 | 62 | (50) | 51 | 108 | (53) |
| Additions to property, plant and equipment and intangible assets | 270 | 143 | 89 | 462 | 258 | 79 |
| Income taxes on oil-producing operations non-compensable with German corporate income tax |
226 | 577 | (61) | 380 | 1,035 | (63) |
| Net income | 181 | 202 | (10) | 394 | 443 | (11) |
We recorded a substantial decline in sales in the Oil & Gas segment. This was mainly due to a 50% decrease in the oil price as well as lower natural gas volumes (volumes –10%, prices/currencies –14%, portfolio 1%). Income from operations before special items did not reach the high value achieved in the second quarter of 2008 as a result of the fall in oil prices.
In Exploration & Production, overall production increased thanks to higher volumes from the Yuzhno Russkoye natural gas field, despite a decline in oil production. Sales and
earnings decreased due to lower prices: Compared with the same period of the previous year the average price of Brent crude fell by around 50% to \$59 per barrel (by –44% to €43 per barrel in euro terms).
In Natural Gas Trading, natural gas sales volumes to third parties fell by around 10% due to the crisis. As a result of the delayed adjustment of sales prices to purchase prices, we recorded slightly higher margins, but this was not sufficient to compensate for significantly lower volumes. As a result, earnings decreased compared with the second quarter of 2008.
2nd QUARTER 2009 Change compared with 2nd quarter 2008
SALES EBIT
before special items
–23% –51%
| Sales by location of company |
Sales by location of customer |
EBIT before special items |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
||
| 2nd Quarter | ||||||||||
| Europe | 7,296 | 9,881 | (26) | 6,749 | 9,382 | (28) | 696 | 1,931 | (64) | |
| Thereof Germany | 5,031 | 6,873 | (27) | 2,350 | 3,405 | (31) | 446 | 1,437 | (69) | |
| North America | 2,562 | 3,382 | (24) | 2,621 | 3,349 | (22) | 184 | 174 | 6 | |
| Asia Pacific | 1,994 | 2,337 | (15) | 2,220 | 2,540 | (13) | 193 | 231 | (16) | |
| South America, Africa, Middle East | 650 | 705 | (8) | 912 | 1,034 | (12) | 67 | 72 | (7) | |
| 12,502 | 16,305 | (23) | 12,502 | 16,305 | (23) | 1,140 | 2,408 | (53) | ||
| 1st Half | ||||||||||
| Europe | 15,303 | 19,961 | (23) | 14,393 | 18,979 | (24) | 1,493 | 3,717 | (60) | |
| Thereof Germany | 11,096 | 14,101 | (21) | 5,589 | 7,180 | (22) | 872 | 2,797 | (69) | |
| North America | 4,701 | 6,284 | (25) | 4,780 | 6,226 | (23) | 255 | 443 | (42) | |
| Asia Pacific | 3,475 | 4,589 | (24) | 3,829 | 4,952 | (23) | 246 | 454 | (46) | |
| South America, Africa, Middle East | 1,242 | 1,392 | (11) | 1,719 | 2,069 | (17) | 131 | 148 | (11) | |
| 24,721 | 32,226 | (23) | 24,721 | 32,226 | (23) | 2,125 | 4,762 | (55) |
In Europe, sales fell by 23% in the first half of the year. Earnings decreased significantly by €2,224 million to €1,493 million. Due to weak demand and falling prices, sales and earnings fell in almost all segments. We recorded a slight increase in sales in Performance Products as a result of the inclusion of the Ciba businesses. Sales and earnings in Agricultural Solutions were at the same level as in the first half of the previous year. This segment made a major contribution to earnings.
In the first half of the year, sales in North America decreased by 34% in dollar terms and by 25% in euro terms. Overall earnings declined by €188 million to €255 million, due to the weak first quarter in almost all segments. Earnings in the second quarter were slightly higher than in the same period of the previous year. Agricultural Solutions recorded an increase in earnings thanks to higher margins.
In Asia Pacific, sales decreased by 32% in local currency terms and by 24% in euro terms. Earnings fell substantially by €208 million to €246 million. The decline in earnings affected almost all segments and was due in particular to the sharp fall in our customers' export business. Earnings in Agricultural Solutions increased thanks to rising demand in China and India. Overall, demand in this region improved in the second quarter.
Sales in South America, Africa, Middle East decreased by 11% in local currency and euro terms. Earnings declined by €17 million to €131 million. Together with Chemicals and Oil & Gas, the Performance Products segment was also affected by the decline in earnings due to the weak textile and leather chemicals business. In contrast, Agricultural Solutions was able to further increase earnings.
In June 2009, the European Food Safety Authority (EFSA) reconfirmed that the npt2 gene contained in Amflora® is safe and that no further scientific studies on this matter are necessary. The EU Commission's prerequisite for the approval of BASF's genetically engineered potato has thus been met. The Commission declared in May 2008 that it would approve Amflora as soon as EFSA confirms that the product is safe. Starch obtained from Amflora can be used for a broad range of possible applications – it makes paper glossier, strengthens yarn and keeps glue liquid for longer.
Under the guidance of BASF Future Business GmbH, 18 partners from industry and science have joined forces to form the cross-sector consortium HE-Lion, with the goal of developing and marketing more efficient, higher-performing and safer lithium-ion batteries by 2015. The batteries are to be used in plug-in hybrid automobiles and in electric-powered vehicles. The German Ministry of Education and Research (BMBF) is further supporting project funding with €21 million.
In the Organic Electronics Forum, a cluster of excellence also supported by the BMBF, BASF scientists are developing nano-structured functional materials and new production processes for printed electronics, i.e., for electronic components that can be printed on elastic carrier materials. For example, the production of labels fitted with sensors, also known as smart labels, which can be used to measure among other things temperature and humidity – an important aspect in the transportation and storage of goods. The goal is to present initial functional materials that greatly improve the process of printing electronic components within three years.
As a result of the acquisition of Ciba, the number of BASF Group employees increased by 9,743 and amounted to 106,667 on June 30, 2009. Without the Ciba acquisition, the headcount would have been 94,816. On June 30, 2009, 64% of BASF Group employees worked in Europe, around 15% in North America, around 15% in Asia Pacific, and 6% in South America, Africa, Middle East.
Compared with the first half of 2008, personnel costs in the first half of 2009 increased by 5.5% to €3,335 million as a result of the acquisition.
In Europe, as of June 30, 2009 around 3,700 employees at 19 BASF Group sites were working shorter hours. Outside of Europe too, the working hours of our employees are being tailored to reduced production in accordance with the respective local requirements.
| June 30, 2009 |
Dec. 31, 2008 |
Change in % |
|
|---|---|---|---|
| Europe | 68,248 | 61,889 | 10 |
| North America (NAFTA) | 16,456 | 15,168 | 8 |
| Asia Pacific | 15,543 | 13,734 | 13 |
| South America, Africa, Middle East |
6,420 | 6,133 | 5 |
| 106,667 | 96,924 | 10 |
The result of the extremely difficult business environment caused by the global economic crisis is that BASF has to face some exceptional challenges in 2009. All segments except for Agricultural Solutions are affected by the recession. However, the indications are that the situation is stabilizing at a low level. In North America the slump appears to be bottoming out and China is again beginning to see stronger growth. Nevertheless, a sustained upturn is not yet in sight. Restocking in several industries and regions as well as economic stimulus packages are improving demand but generally only in the short term. The global financial system remains fragile; overcapacity and rising unemployment are also depressing the situation further.
One of our strengths is that we act quickly and decisively even in difficult times. We have started to respond to the plummeting demand early on – with capacity adjustments, plant shutdowns, flexible work models and short-time working. We apply these measures with just as much rigor as our strict cost management policy, ongoing optimization of working capital and our longer-term programs for boosting efficiency. In this way, we secure our strong cash flow and our solid financing structure.
In order to secure our future business, we are maintaining our research and development expenditure at a high level in 2009. We are adjusting our expenditure on property, plant and equipment to the changed market conditions whilst exploiting the opportunities open to us globally in growth markets.
The integration of the acquired Ciba businesses involves extensive restructuring. We expect this to yield synergies of at least €400 million a year from 2012 onwards. By the end of 2010, annual savings of approximately €300 million are to be achieved. Overall, the integration
process is expected to entail cash costs totaling approximately €550 million, thereof €150 million in 2009. We are also expecting that the integration process will entail noncash costs totaling approximately €400 million in 2009, with €300 million of these costs included as special items in the income for the first half of the year. The restructuring plans include a reduction of around 3,700 positions by 2013. We are reviewing options – including sale, restructuring or closure – for 23 of the 55 former Ciba production sites worldwide: decisions will be made about these sites by the end of the first quarter of 2010.
Particular factors to take into account in the current business environment are the growing risks arising from overcapacities, corporate insolvencies and a further increase in unemployment. Overall, the statements on risks made in the BASF Report 2008 remain valid. Our assessment of the current situation is that there are no significant individual risks and all risks combined do not post a threat to the continued existence of the BASF Group.
More information can be found in the BASF Report 2008, under Risk Report, pages 112–119
We have updated our expectations with regard to the underlying economic conditions worldwide in 2009:
In view of the current economic environment and the expenses resulting from the Ciba integration, we anticipate a significant decline in sales and earnings. Therefore, BASF is unlikely to earn its cost of capital in 2009.
| 2nd Quarter | 1st Half | ||||||
|---|---|---|---|---|---|---|---|
| 2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
||
| Sales | 12,502 | 16,305 | (23.3) | 24,721 | 32,226 | (23.3) | |
| Cost of sales | 8,963 | 11,852 | (24.4) | 18,081 | 23,411 | (22.8) | |
| Gross profit on sales | 3,539 | 4,453 | (20.5) | 6,640 | 8,815 | (24.7) | |
| Selling expenses | 1,461 | 1,434 | 1.9 | 2,754 | 2,792 | (1.4) | |
| General and administrative expenses | 288 | 268 | 7.5 | 546 | 525 | 4.0 | |
| Research expenses | 352 | 340 | 3.5 | 677 | 667 | 1.5 | |
| Other operating income | 123 | 256 | (52.0) | 543 | 593 | (8.4) | |
| Other operating expenses | 789 | 308 | 156.2 | 1,506 | 762 | 97.6 | |
| Income from operations | 772 | 2,359 | (67.3) | 1,700 | 4,662 | (63.5) | |
| Income from companies accounted for using the equity method | 60 | 3 | 16 | 11 | 45.5 | ||
| Other income from participations | 69 | 43 | 60.5 | 73 | 47 | 55.3 | |
| Other expenses from participations | 3 | 6 | (50.0) | 4 | 7 | (42.9) | |
| Interest income | 37 | 45 | (17.8) | 58 | 83 | (30.1) | |
| Interest expense | 201 | 149 | 34.9 | 339 | 293 | 15.7 | |
| Other financial result | (21) | 26 | (65) | (1) | |||
| Financial result | (59) | (38) | (55.3) | (261) | (160) | (63.1) | |
| Income before taxes and minority interests | 713 | 2,321 | (69.3) | 1,439 | 4,502 | (68.0) | |
| Income taxes | 362 | 951 | (61.9) | 631 | 1,849 | (65.9) | |
| Income before minority interests | 351 | 1,370 | (74.4) | 808 | 2,653 | (69.5) | |
| Minority interests | 8 | 73 | (89.0) | 90 | 186 | (51.6) | |
| Net income | 343 | 1,297 | (73.6) | 718 | 2,467 | (70.9) | |
| Earnings per share (€) | |||||||
| Undiluted | 0.37 | 1.39 | (73.4) | 0.78 | 2.63 | (70.3) | |
| Diluted | 0.37 | 1.39 | (73.4) | 0.78 | 2.63 | (70.3) |
| June 30, 2009 |
June 30, 2008 |
Change in % |
Dec, 31, 2008 |
Change in % |
|
|---|---|---|---|---|---|
| Intangible assets | 11,106 | 8,997 | 23.4 | 9,889 | 12.3 |
| Property, plant and equipment | 17,065 | 13,831 | 23.4 | 15,032 | 13.5 |
| Investments accounted for using the equity method | 1,226 | 935 | 31.1 | 1,146 | 7.0 |
| Other financial assets | 1,629 | 2,776 | (41.3) | 1,947 | (16.3) |
| Deferred tax assets | 1,035 | 587 | 76.3 | 930 | 11.3 |
| Other receivables and miscellaneous short-term assets | 842 | 797 | 5.6 | 642 | 31.2 |
| Long-term assets | 32,903 | 27,923 | 17.8 | 29,586 | 11.2 |
| Inventories | 6,299 | 6,704 | (6.0) | 6,763 | (6.9) |
| Accounts receivable, trade | 8,106 | 9,647 | (16.0) | 7,752 | 4.6 |
| Other receivables and miscellaneous short-term assets | 2,851 | 3,310 | (13.9) | 3,948 | (27.8) |
| Marketable securities | 117 | 42 | 178.6 | 35 | 234.3 |
| Cash and cash equivalents | 2,909 | 879 | 230.9 | 2,776 | 4.8 |
| Assets of disposal groups | – | 603 | – | – | – |
| Short-term assets | 20,282 | 21,185 | (4.3) | 21,274 | (4.7) |
| Total assets | 53,185 | 49,108 | 8.3 | 50,860 | 4.6 |
| June 30, 2009 |
June 30, 2008 |
Change in % |
Dec, 31, 2008 |
Change in % |
|
|---|---|---|---|---|---|
| Subscribed capital | 1,176 | 1,193 | (1.4) | 1,176 | – |
| Capital surplus | 3,246 | 3,218 | 0.9 | 3,241 | 0.2 |
| Retained earnings | 12,331 | 14,042 | (12.2) | 13,250 | (6.9) |
| Other comprehensive income | 8 | 640 | (98.8) | (96) | |
| Equity of shareholders of BASF SE | 16,761 | 19,093 | (12.2) | 17,571 | (4.6) |
| Minority interests | 1,099 | 1,074 | 2.3 | 1,151 | (4.5) |
| Stockholders' equity | 17,860 | 20,167 | (11.4) | 18,722 | (4.6) |
| Provisions for pensions and similar obligations | 2,268 | 1,263 | 79.6 | 1,712 | 32.5 |
| Other provisions | 3,166 | 2,847 | 11.2 | 2,757 | 14.8 |
| Deferred tax liabilities | 2,202 | 2,041 | 7.9 | 2,167 | 1.6 |
| Financial indebtedness | 13,124 | 6,655 | 97.2 | 8,290 | 58.3 |
| Other long-term liabilities | 1,060 | 911 | 16.4 | 917 | 15.6 |
| Long-term liabilities | 21,820 | 13,717 | 59.1 | 15,843 | 37.7 |
| Accounts payable, trade | 2,976 | 3,825 | (22.2) | 2,734 | 8.9 |
| Provisions | 2,935 | 2,669 | 10.0 | 3,043 | (3.5) |
| Tax liabilities | 958 | 1,279 | (25.1) | 860 | 11.4 |
| Financial indebtedness | 4,063 | 5,198 | (21.8) | 6,224 | (34.7) |
| Other short-term liabilities | 2,573 | 2,235 | 15.1 | 3,434 | (25.1) |
| Liabilities of disposal groups | – | 18 | – | – | – |
| Short-term liabilities | 13,505 | 15,224 | (11.3) | 16,295 | (17.1) |
| Total stockholders' equity and liabilities | 53,185 | 49,108 | 8.3 | 50,860 | 4.6 |
| 1st Half | ||
|---|---|---|
| 2009 | 2008 | |
| Net income | 718 | 2,467 |
| Depreciation and amortization of intangible assets, property, plant and equipment and financial assets | 1,480 | 1,329 |
| Changes in net working capital | 1,523 | (1,186) |
| Miscellaneous items | (74) | 19 |
| Cash provided by operating activities | 3,647 | 2,629 |
| Payments related to property, plant and equipment and intangible assets | (1,298) | (1,049) |
| Acquisitions/divestitures | (1,501) | 35 |
| Financial investments and other items | (109) | (17) |
| Cash used in investing activities | (2,908) | (1,031) |
| Capital increases/repayments, share repurchases | (95) | (1,000) |
| Changes in financial liabilities | 1,484 | 1,497 |
| Dividends | (1,986) | (1,988) |
| Cash used in financing activities | (597) | (1,491) |
| Net changes in cash and cash equivalents | 142 | 107 |
| Cash and cash equivalents as of beginning of year and other changes | 2,767 | 772 |
| Cash and cash equivalents at end of period | 2,909 | 879 |
Cash provided by operating activities amounted to €3,647 million in the first half of 2009, which was higher by €1,018 million than in the first half of 2008. This increase was achieved despite the much lower net income, thanks to the high level of funds released by the reduction of current assets. Since the end of 2008, inventories and trade accounts receivables declined by €110 million in total to €14,405 million despite the contribution of €1,482 million from the acquisition of Ciba.
A total of €2,908 million was used in investing activities in the first half of the year, compared with €1,031 million in the same period of the previous year. For the acquisition of Ciba Holding AG, liquid funds of €1,746 million were invested when the takeover offer was executed on April 9, 2009. At the same time, cash and cash investments of €241 million were obtained from Ciba. Ciba shares worth €88 million were purchased in 2009 prior to the change of control. This amount was shown under financial investments and miscellaneous items, as were expenses of €344 million for Ciba shares in the second half of 2008. Payments related to property, plant and equipment and intangible assets were again significantly below the corresponding level of depreciation and amortization.
Cash used in financing activities amounted to €597 million. Dividends amounting to €1,791 million were paid out to shareholders in BASF SE and €195 million to minority shareholders in Group companies.
The acquisition of the remaining outstanding shares in Ciba Holding AG following the change of control on April 9, 2009 led to expenses of €95 million, which have been treated as an equity transaction between the shareholders.
Cash and cash equivalents amounted to €2,909 million on June 30, 2009, compared with €2,776 million at the end of 2008. Financial indebtedness, not taking account of the financial liabilities of Ciba taken on at the time of acquisition, increased by €1,365 million in the first half of 2009.
Net debt on June 30, 2009 amounted to €14,278 million compared with €11,738 million on December 31, 2008.
| 1st Half | ||
|---|---|---|
| 2009 | 2008 | |
| Income before minority interests | 808 | 2,653 |
| Actuarial gains/losses from pensions and other obligations; asset ceiling | 197 | |
| Foreign currency translation adjustment | 12 | (384) |
| Fair value changes in available-for-sale securities | (10) | 856 |
| Cash flow hedges | 159 | 3 |
| Revaluation due to acquisition of majority of shares | (1) | (1) |
| Deferred taxes | (56) | (48) |
| Minority interests | 26 | (27) |
| Total income and expense recognized in equity | 327 | 399 |
| Total income and expense for the period | 1,135 | 3,052 |
| Thereof BASF | 1,019 | 2,893 |
| Thereof minority interests | 116 | 159 |
| Retained | Total income and expense recognized |
||||||
|---|---|---|---|---|---|---|---|
| earnings | Other comprehensive income | directly in equity | |||||
| Actuarial gains/losses; asset ceiling |
Foreign curren cy translation adjustment |
Fair value changes in available-for sale securities |
Cash flow hedges |
Revaluation due to acquisition of majority of shares |
Total of other comprehensive income |
||
| As of January 1, 2009 | (1,511) | (637) | 668 | (137) | 10 | (96) | (1,607) |
| Additions | 197 | 12 | – | 159 | – | 171 | 368 |
| Releases | – | – | (10) | – | (1) | (11) | (11) |
| Deferred taxes | – | (1) | (55) | – | (56) | (56) | |
| As of June 30, 2009 | (1,314) | (625) | 657 | (33) | 9 | 8 | (1,306) |
| As of January 1, 2008 | (874) | (497) | 680 | (21) | 12 | 174 | (700) |
| Additions | – | – | 856 | 3 | – | 859 | 859 |
| Releases | – | (384) | – | – | (1) | (385) | (385) |
| Deferred taxes | (40) | 6 | (13) | (1) | – | (8) | (48) |
| As of June 30, 2008 | (914) | (875) | 1,523 | (19) | 11 | 640 | (274) |
| Number of subscribed shares out standing |
Subscribed capital |
Capital surplus |
Retained earnings |
Other com prehensive income 2 |
Equity of sharehold ers of BASF SE |
Minority interests |
Stockhold ers' equity |
|
|---|---|---|---|---|---|---|---|---|
| As of January 1, 2009 | 918,478,694 | 1,176 | 3,241 | 13,250 | (96) | 17,571 | 1,151 | 18,722 |
| Cancellation of own shares | – | – | 6 | (6) | – | – | – | – |
| Effect of acquisitions achieved in stages |
– | – | – | (35) | – | (35) | – | (35) |
| Capital withdrawal/contribution | – | – | – | – | – | – | – | – |
| Dividends paid | – | – | – | (1,791) | – | (1,791) | (195) 3 | (1,986) |
| Net income | – | – | – | 718 | – | 718 | 90 | 808 |
| Change in income and expense recognized directly in equity |
– | – | – | 197 | 104 | 301 | 26 | 327 |
| Changes in scope of consolidation and other changes |
– | – | (1) | (2) | – | (3) | 27 | 24 |
| As of June 30, 2009 | 918,478,694 | 1,176 | 3,246 | 12,331 | 8 | 16,761 | 1,099 | 17,860 |
| Number of subscribed |
Other com | Equity of sharehold |
||||||
|---|---|---|---|---|---|---|---|---|
| shares out standing1 |
Subscribed capital |
Capital surplus |
Retained earnings |
prehensive income 2 |
ers of BASF SE |
Minority interests |
Stockhold ers' equity |
|
| As of January 1, 2008 | 956,370,000 | 1,224 | 3,173 | 14,556 | 174 | 19,127 | 971 | 20,098 |
| Share buyback and cancellation of own shares including own shares intended to be cancelled |
(24,480,000) | (31) | 45 | (1,114) | – | (1,100) | – | (1,100) |
| Capital withdrawal/contribution | – | – | – | – | – | – | 100 | 100 |
| Dividends paid | – | – | – | (1,831) | – | (1,831) | (157) 3 | (1,988) |
| Net income | – | – | – | 2,467 | – | 2,467 | 186 | 2,653 |
| Change in income and expense recognized directly in equity |
– | – | – | (40) | 466 | 426 | (27) | 399 |
| Changes in scope of consolidation and other changes |
– | – | – | 4 | – | 4 | 1 | 5 |
| As of June 30, 2008 | 931,890,000 | 1,193 | 3,218 | 14,042 | 640 | 19,093 | 1,074 | 20,167 |
1 The number of outstanding shares was adjusted following the two-for-one stock split carried out in the second quarter of 2008.
2 Details are provided in the Consolidated Statements of Recognized Income and Expense on page 19.
3 Including profit and loss transfers
| Sales | EBITDA | Income from operations (EBIT) before special items |
Income from operations (EBIT) |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
|
| Chemicals | 1,809 | 3,081 | (41.3) | 419 | 528 | (20.6) | 258 | 377 | (31.6) | 258 | 377 | (31.6) |
| Plastics | 1,750 | 2,495 | (29.9) | 247 | 380 | (35.0) | 138 | 285 | (51.6) | 139 | 285 | (51.2) |
| Performance Products | 2,443 | 2,081 | 17.4 | 6 | 339 | (98.2) | 80 | 221 | (63.8) | (214) | 244 | |
| Functional Solutions | 1,755 | 2,490 | (29.5) | 129 | 193 | (33.2) | 48 | 111 | (56.8) | 29 | 108 | (73.1) |
| Agricultural Solutions | 1,175 | 1,159 | 1.4 | 415 | 422 | (1.7) | 367 | 363 | 1.1 | 366 | 363 | 0.8 |
| Oil & Gas | 2,452 | 3,201 | (23.4) | 625 | 1,167 | (46.4) | 506 | 1,026 | (50.7) | 506 | 1,026 | (50.7) |
| Other | 1,118 | 1,798 | (37.8) | (265) | 4 | (257) | 25 | (312) | (44) | |||
| 12,502 | 16,305 | (23.3) | 1,576 | 3,033 | (48.0) | 1,140 | 2,408 | (52.7) | 772 | 2,359 | (67.3) |
| Research expenses | Assets | Additions to long-term assets 1 |
Amortization and depreciation 2 |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
|
| Chemicals | 32 | 36 | (11.1) | 5,817 | 6,861 | (15.2) | 111 | 183 | (39.3) | 161 | 151 | 6.6 |
| Plastics | 32 | 35 | (8.6) | 4,522 | 5,308 | (14.8) | 64 | 111 | (42.3) | 108 | 95 | 13.7 |
| Performance Products | 77 | 55 | 40.0 | 10,131 | 5,693 | 78.0 | 3,779 | 75 | 220 | 95 | 131.6 | |
| Functional Solutions | 42 | 47 | (10.6) | 8,227 | 8,811 | (6.6) | 40 | 36 | 11.1 | 100 | 85 | 17.6 |
| Agricultural Solutions | 86 | 82 | 4.9 | 5,118 | 4,631 | 10.5 | 66 | 19 | 247.4 | 49 | 59 | (16.9) |
| Oil & Gas | 3 | 1 | 200.0 | 7,979 | 6,881 | 16.0 | 270 | 143 | 88.8 | 119 | 141 | (15.6) |
| Other | 80 | 84 | (4.8) | 11,391 | 10,923 | 4.3 | 60 | 23 | 160.9 | 47 | 48 | (2.1) |
| 352 | 340 | 3.5 | 53,185 | 49,108 | 8.3 | 4,390 | 590 | 804 | 674 | 19.3 |
1 Investments in intangible assets and property, plant and equipment
2 Depreciation and amortization of intangible assets and property, plant and equipment
| Sales | EBITDA | Income from operations (EBIT) before special items |
Income from operations (EBIT) |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
|
| Chemicals | 3,365 | 5,844 | (42.4) | 657 | 1,204 | (45.4) | 342 | 909 | (62.4) | 341 | 909 | (62.5) |
| Plastics | 3,213 | 4,885 | (34.2) | 325 | 826 | (60.7) | 109 | 637 | (82.9) | 109 | 636 | (82.9) |
| Performance Products | 4,120 | 4,085 | 0.9 | 222 | 650 | (65.8) | 203 | 430 | (52.8) | (91) | 461 | |
| Functional Solutions | 3,323 | 4,884 | (32.0) | 176 | 420 | (58.1) | 2 | 251 | (99.2) | (16) | 245 | |
| Agricultural Solutions | 2,320 | 2,105 | 10.2 | 803 | 728 | 10.3 | 711 | 622 | 14.3 | 706 | 622 | 13.5 |
| Oil & Gas | 6,346 | 6,945 | (8.6) | 1,464 | 2,285 | (35.9) | 1,231 | 2,010 | (38.8) | 1,231 | 2,010 | (38.8) |
| Other | 2,034 | 3,478 | (41.5) | (484) | (125) | (473) | (97) | (580) | (221) | |||
| 24,721 | 32,226 | (23.3) | 3,163 | 5,988 | (47.2) | 2,125 | 4,762 | (55.4) | 1,700 | 4,662 | (63.5) |
| Research expenses | Assets | Additions to long-term assets 1 |
Amortization and depreciation 2 |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
|
| Chemicals | 66 | 72 | (8.3) | 5,817 | 6,861 | (15.2) | 213 | 274 | (22.3) | 316 | 295 | 7.1 |
| Plastics | 64 | 67 | (4.5) | 4,522 | 5,308 | (14.8) | 127 | 183 | (30.6) | 216 | 190 | 13.7 |
| Performance Products | 126 | 109 | 15.6 | 10,131 | 5,693 | 78.0 | 3,853 | 136 | 313 | 189 | 65.6 | |
| Functional Solutions | 86 | 94 | (8.5) | 8,227 | 8,811 | (6.6) | 76 | 82 | (7.3) | 192 | 175 | 9.7 |
| Agricultural Solutions | 167 | 154 | 8.4 | 5,118 | 4,631 | 10.5 | 111 | 45 | 146.7 | 97 | 106 | (8.5) |
| Oil & Gas | 5 | 5 | – | 7,979 | 6,881 | 16.0 | 462 | 258 | 79.1 | 233 | 275 | (15.3) |
| Other | 163 | 166 | (1.8) | 11,391 | 10,923 | 4.3 | 73 | 35 | 108.6 | 96 | 96 | – |
| 677 | 667 | 1.5 | 53,185 | 49,108 | 8.3 | 4,915 | 1,013 | 385.2 | 1,463 | 1,326 | 10.3 |
1 Investments in intangible assets and property, plant and equipment
2 Depreciation and amortization of intangible assets and property, plant and equipment
| 2nd Quarter | 1st Half | ||||||
|---|---|---|---|---|---|---|---|
| 2009 | 2008 | Change in % |
2009 | 2008 | Change in % |
||
| Sales | 1,118 | 1,798 | (37.8) | 2,034 | 3,478 | (41.5) | |
| Thereof Styrenics | 604 | 972 | (37.9) | 1,121 | 1,859 | (39.7) | |
| Thereof Other business reported under "Other" | 514 | 826 | (37.8) | 913 | 1,619 | (43.6) | |
| EBIT before special items | (257) | 25 | (473) | (97) | |||
| Thereof Group corporate costs | (56) | (60) | 6.7 | (110) | (117) | 6.0 | |
| Corporate research costs | (78) | (82) | 4.9 | (159) | (160) | 0.6 | |
| Currency results, hedges and other valuation effects | (236) | 169 | (429) | 236 | |||
| Styrenics, fertilizers, other business | 107 | 32 | 234.4 | 216 | 135 | 60.0 | |
| Special items | (55) | (69) | 20.3 | (107) | (124) | 13.7 | |
| EBIT | (312) | (44) | (580) | (221) |
The Consolidated Financial Statements of the BASF Group for the year ending December 31, 2008 were prepared according to the International Financial Reporting Standards (IFRS) valid as of the balance sheet date. The Interim Financial Statements as of June 30, 2009 have been prepared in line with the rules of International Accounting Standard 34 in abbreviated form and using the same
accounting policies. The Interim Financial Statements and Interim Management's Analysis have been neither audited nor subject to an auditor's review.
The BASF Report 2008 containing the Consolidated Financial Statements as of December 31, 2008 can be found on the Internet at: basf.com/report
The Consolidated Financial Statements include BASF SE, as well as all material subsidiaries on a fully consolidated basis. Material jointly operated companies are proportionally consolidated. The development of the number of fully and proportionally consolidated companies is shown in the table.
There have been 72 first-time consolidations since the beginning of 2009 – 69 as a result of the acquisition of Ciba Holding AG and 3 due to the increasing importance of these companies.
Nine companies have been deconsolidated since the beginning of 2009, as a result of mergers with other BASF companies, sale to third parties or decreased significance.
| 2009 | 2008 | |
|---|---|---|
| As of January 1 | 293 | 297 |
| Thereof proportionally consolidated | 19 | 18 |
| First-time consolidations | 72 | 6 |
| Thereof proportionally consolidated | – | 1 |
| Deconsolidations | 9 | 12 |
| Thereof proportionally consolidated | – | – |
| As of June 30 | 356 | 291 |
| Thereof proportionally consolidated | 19 | 19 |
| Million € | Effect in % | |
|---|---|---|
| Long-term assets | 3,666 | 11.1 |
| Thereof goodwill | 832 | 14.9 |
| other intangible assets | 752 | 13.6 |
| property, plant and equipment | 2,069 | 12.1 |
| Short-term assets | 2,011 | 9.9 |
| Thereof inventories | 1,091 | 17.3 |
| trade receivables | 391 | 4.8 |
| other receivables and other assets | 287 | 10.1 |
| Assets | 5,677 | 10.7 |
On April 9, BASF completed the acquisition of Ciba Holding AG. The purchase price was €2,178 million (CHF 3,314 million). Following the acquisition, a purchase price allocation must be performed in accordance with IFRS 3. This can be adjusted within one year. The assets of Ciba Holding AG have been included in the Interim Financial Statements as of June 30, 2009, taking account of a provisional, indicative purchase price allocation.
BASF's worldwide business is driven by operating divisions that are aggregated into six segments for reporting purposes.
Chemicals consists of the Inorganics, Petrochemicals and Intermediates divisions. On January 1, 2009, the activities of BASF Fuel Cell GmbH were transferred from Other to the Inorganics operating division, and the figures for the previous year were adjusted accordingly.
Plastics is composed of the Performance Polymers and Polyurethanes divisions. On January 1, 2009, the styrene copolymers business from the Performance Polymers division was transferred to Styrenics. Styrenics does not belong to a segment, but rather is shown under Other.
In the first quarter of 2009, Performance Products included the Acrylics & Dispersions, Care Chemicals and Performance Chemicals operating divisions. The businesses of Ciba Holding AG, which was acquired on April 9, 2009, were managed as a separate division in the Performance Products segment. As of the third quarter of 2009, the former Ciba businesses will be integrated into the operating divisions of Performance Products.
In order to accommodate the changes to our portfolio as a result of the acquisition of Ciba Holding AG, the divisions in the Performance Products segment have been restructured as of April 1, 2009. This segment has been assigned the new Paper Chemicals division consisting of BASF's paper chemicals and binders business as well as the kaolin minerals business, which were previously part of the Acrylics & Dispersions division. Ciba's business with products for paper manufacturing will be integrated into the Paper Chemicals division as of the third quarter of 2009.
The Acrylics & Dispersions division has been renamed Dispersions & Pigments. This division consists of BASF's business with raw materials for the coating and paint industry. In addition, the dispersions business has been supplemented by the pigments and resins business of the Performance Chemicals division. The acrylic monomers business has been assigned to the Petrochemicals division, which consequently encompasses the key steps in the propylene value-adding chain. The superabsorbents business has been assigned to the Care Chemicals division. All of Ciba's Coating Effects activities will be integrated into the Dispersions & Pigments division as of the third quarter of 2009.
In the Care Chemicals division, BASF combines all businesses in the areas of personal care and hygiene in addition to the human and animal nutrition units and pharmaceuticals business. The assignment of the superabsorbents business to Care Chemicals has strengthened the division's portfolio with consumer-related products for personal care. Ciba's Home & Personal Care business will be integrated into the Care Chemicals division as of the third quarter of 2009.
The Performance Chemicals division now primarily offers innovative and specific solutions for a broad range of industries including the plastics processing industry,
automotive suppliers, refineries, users of oil field and mining chemicals, as well as leather and textiles processers. Ciba's Plastic Additives business and the majority of Ciba's Water Treatment business will be integrated into the Performance Chemicals division as of the third quarter of 2009.
Functional Solutions comprises the Catalysts, Construction Chemicals and Coatings divisions.
Agricultural Solutions contains the Crop Protection division.
Oil & Gas is composed of the Oil & Gas division with the Exploration & Production and Natural Gas Trading business sectors.
Activities not allocated to a particular division are reported under Other and include, among other things, Styrenics as well as our fertilizer activities. In addition, the sale of raw materials, engineering and other services, rental income and leases are reported under Other.
Group corporate costs consist of the expenses for steering the BASF Group and are not allocated to the segments but reported under Other.
With our cross-divisional corporate research, which is also reported under Other, we develop growth clusters and ensure the long-term competence of BASF with regard to technology and methods.
Earnings from currency conversion reported under Other include earnings not allocated to the segments from the hedging of forecasted sales, from currency positions that are macrohedged as well as from the conversion of financial liabilities.
In addition, earnings resulting from hedging for raw material price risks that are not allocated to the segments are recorded in Other.
Transfers between the segments are almost always executed at market-based prices. The allocation of assets and depreciation to the segments is based on economic control. Assets used by more than one segment are allocated based on the percentage of usage.
| 2009 Assets of businesses included under Other 2,434 Financial assets 2,855 Deferred tax assets 1,035 |
2008 |
|---|---|
| 3,147 | |
| 3,711 | |
| 587 | |
| Cash and cash equivalents, marketable securities 3,026 |
921 |
| Defined benefit assets 328 |
527 |
| Miscellaneous receivables/prepaid expenses 1,713 |
2,030 |
| 11,391 | 10,923 |
| 2nd Quarter | 1st Half | |||
|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |
| Income from operations | 506 | 1,026 | 1,231 | 2,010 |
| Income from participations | 73 | 8 | 24 | 10 |
| Other income | (94) | (19) | (211) | (25) |
| Income before taxes and minority interests | 485 | 1,015 | 1,044 | 1,995 |
| Income taxes | 317 | 773 | 590 | 1,430 |
| Thereof income taxes on oil-producing operations non-compensable with German corporate income tax |
226 | 577 | 380 | 1,035 |
| Income before minority interests | 168 | 242 | 454 | 565 |
| Minority interests | (13) | 40 | 60 | 122 |
| Net income | 181 | 202 | 394 | 443 |
In the reconciliation reporting for Oil & Gas, the income from operations of the Oil & Gas segment is reconciled to the contribution of the companies in this segment to the net income of the BASF Group.
Other income includes all expenses and income not included in income from operations of the segment, the interest result and the miscellaneous financial result.
The increase in income from participations in the second quarter resulted chiefly from foreign currency gains on loans denominated in U.S. dollars and euros at OAO
Severneftegazprom (which is accounted for using the equity method) due to the appreciation of the Russian ruble. The decrease in other income related chiefly to results from foreign currency hedging not allocated to the Oil & Gas segment, that are reported under Other.
| Million € | 2nd Quarter | 1st Half | |||
|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | ||
| Income from currency conversion and foreign currency transactions | (5) | 19 | 99 | 126 | |
| Disposal of property, plant and equipment | 15 | 13 | 22 | 20 | |
| Reversal/usage of provisions | (32) | 2 | 9 | 4 | |
| Reversal of allowances for doubtful receivables | 22 | 21 | 33 | 25 | |
| Revenue from miscellaneous business activities | 20 | (9) | 34 | 34 | |
| Other | 103 | 210 | 346 | 384 | |
| Other operating income | 123 | 256 | 543 | 593 |
Provisions for the BASF Option Program that were reversed in the first quarter of 2009 had to be increased in the second quarter due to the higher share price. The
decline in Other in the first half of 2009 resulted from income from hedging against raw material price risks in the first half of 2008.
| Million € | 2nd Quarter | 1st Half | |||
|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | ||
| Losses from currency conversion and foreign currency transactions | 79 | 22 | 378 | 97 | |
| Oil and gas exploration expenses | 31 | 62 | 51 | 108 | |
| Other | 679 | 224 | 1,077 | 557 | |
| Other operating expenses | 789 | 308 | 1,506 | 762 |
In the first half of 2009, Other included special charges of €431 million (first half of 2008: €124 million), €375 million of which were in the second quarter (second quarter of 2008:
€64 million). This was primarily the result of the integration of Ciba, in particular due to the use of inventory valued at market prices at the time of the acquisition.
| Million € | 2nd Quarter | 1st Half | ||
|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |
| Income from companies accounted for using the equity method | 60 | 3 | 16 | 11 |
| Income from participations in affiliated and associated companies | 67 | 38 | 68 | 39 |
| Income from the disposal of participations | – | 2 | – | 4 |
| Income from profit transfer agreements | 2 | 2 | 4 | 3 |
| Income from tax allocation to participating interests | – | 1 | 1 | 1 |
| Other income from participations | 69 | 43 | 73 | 47 |
| Losses from loss transfer agreements | (1) | (6) | (1) | (7) |
| Write-downs of/losses from the sale of participations | (2) | – | (3) | – |
| Other expenses from participations | (3) | (6) | (4) | (7) |
| Interest income from cash and cash equivalents | 30 | 30 | 44 | 53 |
| Interest and dividend income from securities and loans | 7 | 15 | 14 | 30 |
| Interest income | 37 | 45 | 58 | 83 |
| Interest expense | (201) | (149) | (339) | (293) |
| Write-ups/profits from the sale of securities and loans | 16 | – | 16 | – |
| Expected income from plan assets to cover pensions and similar obligations | 174 | 169 | 322 | 340 |
| Income from plan assets to cover other long-term personnel obligations | (2) | 3 | 6 | 13 |
| Income from construction interest | 15 | 11 | 28 | 22 |
| Other financial income | 203 | 183 | 372 | 375 |
| Write-downs/losses from the disposal of securities and loans | (9) | (4) | (10) | (5) |
| Interest accrued on pension obligations and similar obligations | (195) | (164) | (361) | (325) |
| Expenses from other long-term personnel obligations | (6) | (8) | (20) | (24) |
| Interest accrued on other long-term personnel provisions | (11) | (9) | (21) | (18) |
| Other financial expenses | (3) | 28 | (25) | (4) |
| Other financial result | (224) | (157) | (437) | (376) |
| Financial result | (59) | (38) | (261) | (160) |
The positive result in the second quarter of 2009 from companies accounted for using the equity method primarily resulted from gains on loans in U.S. dollars and euros at OAO Severneftegazprom due to the appreciation of the Russian ruble.
The higher negative interest result can be attributed in particular to the higher level of debt. However, lower interest levels in the United States and in Europe had a counteractive effect. The decline in interest income was due in particular to the partial repayment of the loan granted to OAO Severneftegazprom in the previous year.
The lower level of expected income can be attributed to the decline in pension plan assets compared with the previous year.
| 2nd Quarter | 1st Half | ||||
|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | ||
| Germany | 91 | 538 | 116 | 1,173 | |
| Foreign oil production branches of German companies | 298 | 751 | 495 | 1,336 | |
| Other foreign | 324 | 1,032 | 828 | 1,993 | |
| 713 | 2,321 | 1,439 | 4,502 |
| 2nd Quarter | 1st Half | ||||
|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | ||
| Germany | 20 | 67 | 45 | 233 | |
| Foreign oil production branches of German companies | 270 | 688 | 453 | 1,232 | |
| Thereof non-compensable | 226 | 577 | 380 | 1,035 | |
| Other foreign | 72 | 196 | 133 | 384 | |
| 362 | 951 | 631 | 1,849 | ||
| Tax rate (%) | 50.8 | 41.0 | 43.8 | 41.1 |
Foreign income taxes for oil production decreased as a result of the lower oil price. The contribution of the Oil & Gas segment towards BASF Group income before taxes and minority interests amounted to 72.6% (same period of previous year: 43.4%). Due to the higher earnings contribution of the highly taxed Oil & Gas segment, the tax rate of the BASF Group increased in particular in the second quarter compared to the same period of the previous year.
| Million € | 2nd Quarter | 1st Half | |||
|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | ||
| Minority interests in profits | 19 | 75 | 106 | 191 | |
| Minority interests in losses | (11) | (2) | (16) | (5) | |
| 8 | 73 | 90 | 186 |
Minority interests in profits resulted primarily from natural gas trading companies as well as Gazprom's stake in the German Wintershall subsidiary that holds production and exploration rights in Libya.
| 2nd Quarter | 1st Half | ||||
|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | ||
| Net income | Million € | 343 | 1,297 | 718 | 2,467 |
| Number of outstanding shares (weighted average) | 1,000 | 918,479 | 935,760 | 918,479 | 939,168 |
| Earnings per share | € | 0.37 | 1.39 | 0.78 | 2.63 |
The calculation of earnings per share is 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 the BASF incentive share program "Plus."
In the first half of 2009, and in the corresponding period of 2008, there was no dilutive effect; undiluted earnings per share were the same as the diluted value per share.
| 1st Half 2009 | |||||
|---|---|---|---|---|---|
| Intangible assets | Property, plant and equipment |
Investments accounted for using the equity method and other financial assets |
|||
| Acquisition costs | |||||
| Balance as of January 1 | 12,408 | 49,147 | 3,424 | ||
| Additions | 1,703 | 3,212 | 299 | ||
| Disposals | 384 | 297 | 564 | ||
| Exchange differences | (94) | (133) | (22) | ||
| Balance as of June 30 | 13,633 | 51,929 | 3,137 | ||
| Amortization and depreciation | |||||
| Balance as of January 1 | 2,519 | 34,115 | 331 | ||
| Additions | 335 | 1,128 | 17 | ||
| Disposals | 329 | 297 | 66 | ||
| Exchange differences | 2 | (82) | – | ||
| Balance as of June 30 | 2,527 | 34,864 | 282 | ||
| Net book value as of June 30 | 11,106 | 17,065 | 2,855 |
| 1st Half 2008 | |||
|---|---|---|---|
| Intangible assets | Property, plant and equipment |
Investments accounted for using the equity method and other financial assets |
|
| Acquisition costs | |||
| Balance as of January 1 | 11,517 | 45,757 | 3,101 |
| Additions | 73 | 997 | 1,070 |
| Disposals | 67 | 312 | 103 |
| Exchange differences | (360) | (699) | (45) |
| Balance as of June 30 | 11,163 | 45,743 | 4,023 |
| Amortization and depreciation | |||
| Balance as of January 1 | 1,958 | 31,542 | 315 |
| Additions | 313 | 1,042 | 3 |
| Disposals | 65 | 273 | 6 |
| Exchange differences | (40) | (399) | – |
| Balance as of June 30 | 2,166 | 31,912 | 312 |
| Net book value as of June 30 | 8,997 | 13,831 | 3,711 |
Additions to property, plant and equipment from January to June 2009, arose from a number of investments. The most significant additions to property, plant and equipment and intangible assets resulted from the acquisition of Ciba Holding AG. Other significant additions are the
expansion of plants to scrub synthesis gas in Ludwigshafen, the construction of natural gas pipelines, the construction of a resins plant in Wyandotte, Michigan, and a polyol plant in Geismar, Louisiana.
| Million € | June 30, 2009 |
Dec. 31, 2008 |
|---|---|---|
| Raw materials and factory supplies | 1,741 | 1,769 |
| Work-in-process, finished goods and mer chandise |
4,460 | 4,924 |
| Advance payments and services-in-process | 98 | 70 |
| 6,299 | 6,763 |
Work-in-process and finished goods and merchandise are combined into one item due to the production conditions in the chemical industry. Services-in-process relate primarily to inventory not invoiced at the balance sheet date. Inventories are valued using the weighted average cost method.
| Subscribed | ||
|---|---|---|
| Shares | capital | |
| Outstanding shares as of December 31, 2008 | 923,128,567 | 1,182 |
| Shares cancelled by June 30, 2008 | (4,649,873) | (6) |
| Issued shares as disclosed in the financial statements | 918,478,694 | 1,176 |
The Board of Executive Directors received approval at the Annual Meeting on April 24, 2008 to buy back BASF shares to a maximum amount of 10% of subscribed capital by October 23, 2009. The shares will be purchased on the stock exchange or through a public purchase offer addressed to all shareholders. The price paid per share may not be higher than the highest market price on the buying day and may not be lower than 25% of that market price. In the case of a public purchase offer, the price offered by BASF may be a maximum of 10% higher than the highest market price on the third trading day prior to the publishing of the public purchase offer. This authorization superseded the prior authorization to repurchase BASF shares granted by the Annual Meeting on April 26, 2007.
The Board of Executive Directors is authorized to cancel the repurchased shares without the approval of a further resolution at the Annual Meeting. A sale of treasury shares is only authorized after a corresponding resolution at the Annual Meeting, except when, with the approval of the Supervisory Board, the shares are used to acquire companies, parts of companies or participations in companies in return for shares.
Share buybacks were stopped in the fourth quarter of 2008 due to the financial and economic crisis.
In the second quarter of 2009, the own shares held by BASF SE were cancelled. Reclassification of the amount of the calculated par value of the cancelled shares took place from the retained earnings to capital surplus. On June 30, 2009, no own shares were held by BASF SE.
Transfers from Other retained earnings increased legal reserves by €5 million in the first half year. The offsetting of actuarial gains and losses, as well as the asset ceiling, resulted in an increase in retained earnings of €197 million.
| June 30, 2009 |
Dec. 31, 2008 |
|
|---|---|---|
| Legal reserves | 427 | 420 |
| Other retained earnings | 11,904 | 12,830 |
| 12,331 | 13,250 |
Assumptions used to determine the defined benefit obligation (weighted average in %)
| Germany | Foreign | |||
|---|---|---|---|---|
| June 30, 2009 | Dec. 31, 2008 | June 30, 2009 | Dec. 31, 2008 | |
| Discount rate | 6.00 | 6.00 | 5.53 | 5.84 |
| Projected increase of wages and salaries | 2.75 | 2.75 | 3.69 | 4.37 |
| Projected pension increase | 2.00 | 2.00 | 0.80 | 0.57 |
| Germany | Foreign | ||||
|---|---|---|---|---|---|
| June 30, 2009 | Dec. 31, 2008 | June 30, 2009 | Dec. 31, 2008 | ||
| Discount rate | 6.00 | 5.25 | 5.33 | 5.82 | |
| Projected increase of wages and salaries | 2.75 | 2.75 | 3.69 | 4.50 | |
| Projected pension increase | 2.00 | 2.00 | 0.80 | 0.68 | |
| Expected return on plan assets | 5.42 | 5.18 | 6.58 | 7.20 |
The assumptions regarding the overall expected long-term rate of return are based on the desired portfolio structure and forecasts of expected individual asset class returns. The forecasts are based on long-term historical average returns and take into consideration the current yield level and the inflation trend.
The first-time recognition of the pension obligations taken over from Ciba, the majority of which are denominated in Swiss francs, led in the first half of 2009 to a reduction of the average weighted discount rate.
| Million € | June 30, 2009 | June 30, 2008 | Dec. 31, 2008 |
|---|---|---|---|
| Other long-term provisions | 3,166 | 2,847 | 2,757 |
| Short-term provisions | 2,935 | 2,669 | 3,043 |
| 6,101 | 5,516 | 5,800 |
In the first half of 2009, other provisions increased compared with the end of 2008. This increase can primarily be attributed to the addition of provisions from the acquisition of Ciba Holding AG.
| June 30, 2009 | June 30, 2008 | Dec. 31, 2008 | ||||
|---|---|---|---|---|---|---|
| Less than one year |
More than one year |
Less than one year |
More than one year |
Less than one year |
More than one year |
|
| Accounts payable, trade | 2,976 | – | 3,825 | – | 2,734 | – |
| Bonds and other liabilities to the capital market | 3,479 | 11,934 | 4,695 | 6,170 | 5,346 | 7,227 |
| Liabilities to credit institutions | 584 | 1,190 | 503 | 485 | 878 | 1,063 |
| Financial indebtedness | 4,063 | 13,124 | 5,198 | 6,655 | 6,224 | 8,290 |
| Tax liabilities | 958 | – | 1,279 | – | 860 | – |
| Advances received on orders | 55 | – | 55 | – | 116 | – |
| Liabilities on bills | 77 | 24 | 20 | 26 | 11 | 27 |
| Liabilities related to social security | 169 | 13 | 131 | 17 | 151 | 16 |
| Miscellaneous liabilities | 2,050 | 857 | 1,857 | 697 | 3,018 | 711 |
| Deferred income | 222 | 166 | 172 | 171 | 138 | 163 |
| Other liabilities | 2,573 | 1,060 | 2,235 | 911 | 3,434 | 917 |
| Carrying amounts based on effective interest method |
|||||
|---|---|---|---|---|---|
| Nominal value |
Effective interest rate |
June 30, 2009 |
Dec. 31, 2008 |
June 30, 2008 |
|
| 3.5% Euro Bond 2003/2010 of BASF SE | 1,000 | 3.63 % | 999 | 998 | 997 |
| 4% Euro Bond 2006/2011 of BASF SE | 1,000 | 4.05 % | 999 | 999 | 999 |
| 3.375% Euro Bond 2005/2012 of BASF SE | 1,400 | 3.42 % | 1,398 | 1,398 | 1,398 |
| 3.75% Euro Bond 2009/2012 of BASF SE | 1,350 | 3.97 % | 1,341 | – | – |
| 4.5% Euro Bond 2006/2016 of BASF SE | 500 | 4.62 % | 497 | 496 | 496 |
| 5.875% GBP Bond 2009/2017 of BASF SE | 400 | 6.04 % | 465 | – | – |
| 3-Month EURIBOR Bond 2006/2009 of BASF SE | 500 | variable | – | 500 | 500 |
| 3.25% CHF Bond 2008/2011 of BASF Finance Europe N.V. | 300 | 3.39 % | 196 | 201 | 186 |
| 6% Euro Bond 2008/2013 of BASF Finance Europe N.V. | 1,250 | 6.15 % | 1,243 | 1,242 | – |
| 5% Euro Bond 2007/2014 of BASF Finance Europe N.V. | 1,000 | 5.09 % | 996 | 996 | 996 |
| 5% Euro Bond 2007/2014 of BASF Finance Europe N.V. | 250 | 4.83 % | 252 | 252 | 253 |
| 3.625% CHF Bond 2015/2011 of BASF Finance Europe N.V. | 200 | 3.77 % | 130 | 134 | 124 |
| 5.125% Euro Bond 2009/2015 of BASF Finance Europe N.V. | 1,500 | 5.30 % | 1,487 | – | – |
| 5.125% Euro Bond 2009/2015 of BASF Finance Europe N.V. | 500 | 4.38 % | 519 | – | – |
| 4.5% Euro Medium Term Note 2009/2016 of BASF Finance Europe N.V. | 150 | 4.56 % | 149 | – | – |
| USD Extendible Floating Rate Notes of BASF Finance Europe N.V. | 4.51 % | 314 | 330 | 856 | |
| 3.25% CHF Bond 2006/2012 of Ciba Spezialitätenchemie Finanz AG | 225 | 3.32 % | 151 | – | – |
| 4.875% Euro Bond 2003/2018 of Ciba Spec. Chem. Finance Luxembourg S.A. | 500 | 4.88 % | 506 | – | – |
| USD Commercial Papers | 4,458 | 3,150 | 4,406 | 3,545 | |
| Other bonds | 621 | 621 | 515 | ||
| Bonds and other liabilities to the capital market | 15,413 | 12,573 | 10,865 | ||
| Liabilities to credit institutions | 1,774 | 1,941 | 988 | ||
| 17,187 | 14,514 | 11,853 |
Material supply relationships exist for the supply of oil and gas between companies of the BASF Group and the proportionally consolidated joint venture companies Wintershall Erdgas Handelshaus GmbH & Co. KG, Berlin, and Wintershall Erdgas Handelshaus Zug AG, Zug, Switzerland. These transactions are conducted at arm's length prices and business terms. The unconsolidated portion of these supplies amounted to €383 million in the first half of 2009 and €798 million in the same period of 2008.
In addition, there are material supply relationships with Ellba C.V., Netherlands, and Ellba Eastern Private Ltd., Singapore. The unconsolidated portion of these supplies amounted to €109 million in the first half of 2009 and €249 million in the same period of 2008.
There were no reportable related party transactions with members of the Board of Executive Directors or the Supervisory Board. BASF has not issued loans to members of the Board of Executive Directors or the Supervisory Board.
| 2nd Quarter | 1st Half | |||
|---|---|---|---|---|
| Million € | Million € | Million € | Million € | |
| 2009 | 2008 | 2009 | 2008 | |
| Income before taxes and minority interests | 713 | 2,321 | 1,439 | 4,502 |
| Special items | 368 | 49 | 425 | 100 |
| Amortization of intangible assets | 205 | 147 | 335 | 286 |
| Amortization of intangible assets contained in the special items | (59) | – | (59) | – |
| Adjusted income before taxes and minority interests | 1,227 | 2,517 | 2,140 | 4,888 |
| Adjusted income taxes | 490 | 1,005 | 812 | 1,957 |
| Adjusted income before minority interests | 737 | 1,512 | 1,328 | 2,931 |
| Adjusted minority interests | 10 | 75 | 94 | 189 |
| Adjusted net income | 727 | 1,437 | 1,234 | 2,742 |
| Weighted average number of outstanding shares (thousands) |
918,479 | 935,760 | 918,479 | 939,168 |
| Adjusted earnings per share (€) |
0.79 | 1.54 | 1.34 | 2.92 |
The earnings per share figure adjusted for special items and amortization of intangible assets has established itself internationally as a key figure that can be compared over the course of time and is particularly suitable for forecasts of future earnings.
The special items are primarily the result of the integration of acquired businesses, restructuring measures, impairment losses and losses resulting from divestitures. This involves expenses and income that do not arise in conjunction with ordinary business activities. Intangible assets primarily result from purchase price allocation following acquisitions. The amortization of intangible assets is therefore of a temporary nature.
The special items and amortization of intangible assets in the reporting period were primarily incurred in Group
companies with a tax rate that is lower than the average tax rate of the BASF Group. The adjustment of these expenses therefore caused a relatively low tax effect. As a result, the tax rate based on the adjusted earnings is below the tax rate determined in accordance with International Financial Reporting Standards (IFRS).
The calculation of earnings per share in accordance with IFRS is presented in the Notes on page 28. The adjusted income before taxes and minority interests, the adjusted net income and the adjusted earnings per share are indicators that are not defined in IFRS. They should not be viewed in isolation, but rather treated as supplementary information.
To the best of our knowledge, and in accordance with the applicable reporting principles for interim financial reporting, the interim consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the interim management report of the Group includes a fair review of the development and performance of the business and 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 months of the financial year.
Ludwigshafen, July 27, 2009 BASF SE The Board of Executive Directors
This report contains forward-looking statements. These statements are based on current estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future events that may not prove to be accurate. Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. Such factors include those discussed from pages 112 to 119 in the BASF Report 2008. The BASF Report can be found on the Internet at: basf.com/report. We do not assume any obligation to update the forward-looking statements contained in this report.
3RD QUARTER RESULTS 2009
You can find this and other publications from BASF on the Internet at www.basf.com
You can also order the reports:
• by telephone: +49 621 60-91827
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General inquiries
Corporate Media Relations
Investor Relations
Magdalena Moll, Phone: +49 621 60-48230, Fax: +49 621 60-22500 Internet
BASF SE, 67056 Ludwigshafen, Germany
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