Quarterly Report • Oct 31, 2008
Quarterly Report
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July – September 2008 Published on October 30, 2008
| 3rd Quarter | January – September | |||||
|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
|
| 15,772 | 13,963 | 13.0 | 47,998 | 43,251 | 11.0 | |
| 2,171 | 2,355 | (7.8) | 8,159 | 7,691 | 6.1 | |
| 13.8 | 16.9 | – | 17.0 | 17.8 | – | |
| 1,568 | 1,705 | (8.0) | 6,330 | 5,851 | 8.2 | |
| 1,509 | 1,689 | (10.7) | 6,171 | 5,706 | 8.1 | |
| (39) | (105) | 62.9 | (199) | (264) | 24.6 | |
| 1,470 | 1,584 | (7.2) | 5,972 | 5,442 | 9.7 | |
| 758 | 1,213 | (37.5) | 3,225 | 3,272 | (1.4) | |
| 0.82 | 1.25 | (34.4) | 3.45 | 3.33 | 3.8 | |
| 948 | 1,556 | (39.1) | 3,577 | 4,299 | (16.8) | |
| 602 | 658 | (8.5) | 1,615 | 1,694 | (4.7) | |
| 602 | 658 | (8.5) | 1,615 | 1,694 | (4.7) | |
| 662 | 666 | (0.6) | 1,988 | 1,985 | 0.2 | |
| 39,626 | 35,725 | 10.9 | – | – | – | |
| 1,604 | 1,616 | (0.7) | 4,766 | 4,889 | (2.5) | |
| 96,695 | 95,126 | 1.6 | – | – | – | |
1 Values were adjusted for the two-for-one stock split conducted in the 2nd quarter of 2008.
2 Property, plant and equipment and intangible assets
3 Property, plant and equipment, intangible assets, inventories and business-related receivables. The previous year's values have been adjusted for the new segment structure. More information can be found in the Notes on pages 20 and 21.
| 01 | BASF Group Business | Revie w |
||
|---|---|---|---|---|
| ---- | -- | --------------------- | -- | ------------ |
THE NEW EXCELLENCE PROGRAM NEXT comprises 500 individual projects globally in all divisions and functions of BASF. With measures in the areas portrayed above, we aim to achieve a new dimension of value creation at BASF.
In October 2008, BASF launched NEXT, a new excellence program to further improve productivity and effectiveness in all functions and working areas. Together with our ongoing efficiency improvement programs, this should contribute more than €1 billion to earnings per year as of 2012. A large proportion of this amount is expected to be achieved as early as 2009 and 2010.
NEXT stands for a new dimension in value creation at BASF. Our aim is to reach the next level of operational excellence in conjunction with increased innovation and an enhanced corporate culture. NEXT involves all regions, divisions and functions of BASF in more than 500 individual projects – ranging from the simplification of processes and increased bundling of resources through to the use of new IT technologies.
One example of process optimization is the Accelerator project, which was launched in April 2008 and is scheduled to be completed by October 2011. This project involves simplifying, optimizing and standardizing global sales, planning and procurement processes. To this end,
international teams have examined processes and identified potential for improvement across all regions and divisions. Based on this, we are revising the processes concerned and expect the changes to lead to a significant increase in earnings of at least €175 million.
In addition, as part of our Asia Pacific site project, we will optimize our nine largest sites in Asia by the end of 2010, and expect this to give rise to improvements of €80 million.
These are just two examples from the wide range of individual projects that make up NEXT. They go far beyond the classic cost-cutting and restructuring measures with which we have already set industry standards. We are counting on NEXT to establish excellence in all areas of our day-to-day business. We want to be able to act even more flexibly, faster and more decisively so that we can uphold our position as global market leader in the chemical industry despite the increased challenges we are facing. ///
THE INFRARED PHOTO SHOWS A HOUSE with a well-insulated roof on the left (blue area), whereas the right, poorly insulated roof emits heat (red area). This heat loss can be prevented by using innovative BASF products. With the aid of our modern thermal insulation materials, the energy consumption for heating homes can be reduced by more than 70%.
In 2008, BASF became the first company in the world to present a comprehensive carbon balance. The results show that, by using products, technologies and system solutions from the world's leading chemical company, customers and end users can even today save three times more greenhouse gas emissions than the entire amount caused by the production and disposal of all BASF products.
BASF products enable global savings of more than 250 million metric tons of CO2 in areas as diverse as construction, the automotive industry and industrial production. This is three times more than the amount emitted in the production, including raw material provision and precursors, and disposal of all BASF products. In order to maintain this factor of 3 in the long term, and even further improve on it, BASF is investing in innovative technologies and materials for sustainable climate protection. The company spends more than €400 million per year, i.e., around one-third of its total research and development budget, in the areas of energy efficiency, climate protection, resource conservation and renewable raw materials. In these projects, BASF researchers are working, for instance, on materials for the next generation of solar cells, innovative fuel cells and power-saving organic light-emitting diodes.
For its Carbon Balance, BASF has received the European Responsible Care® Special Award 2008 from the European Chemical Industry Council. Another distinction received by BASF was to be named the leading chemical company in the most important sustainability index worldwide, the Dow Jones Sustainability Index (DJSI World). The key factors here included the company's climate strategy and the development of innovative and eco-efficient products. In addition, BASF is the worldwide number 1 in the prestigious Carbon Disclosure Leadership Index (CDLI). The index of the international Carbon Disclosure Project (CDP) is an honor roll for corporations addressing the challenges of climate change and carbon disclosure practices. ///
Detailed information can be found at corporate.basf.com/climateprotection.
Third-quarter sales in 2008 rose by 13% to €15.8 billion, or even by 18% when adjusted for currency effects, compared with the same quarter of 2007.
All divisions increased their sales prices. We increased volumes in almost all segments, despite plant shutdowns due to the hurricanes on the U.S. Gulf Coast as well as the restrictions in China as a result of the Olympic Games. Currency effects, in particular the weak U.S. dollar, had a negative impact on sales in euro terms in all operating divisions.
| 3rd Quarter | January to September |
|
|---|---|---|
| Volumes | 1 | 5 |
| Prices | 17 | 13 |
| Acquisitions/divestitures | – | – |
| Currencies | (5) | (7) |
| 13 | 11 |
In the Chemicals segment, we increased sales in all divisions, above all driven by higher prices. Volumes also increased, although this segment was most greatly affected by the hurricanes on the U.S. Gulf Coast.
In the Plastics segment, volumes and prices were increased and sales rose slightly despite the slowdown in key consumer industries.
The Performance Products segment posted higher sales. Prices were raised substantially, in particular in the Care Chemicals division.
The Functional Solutions segment increased sales slightly, despite the substantially reduced demand from the automotive and construction industries.
Volumes and prices were increased significantly in the Agricultural Solutions segment. The high price level for agricultural products resulted in a strong demand for our innovative crop protection agents. Although the third quarter is usually rather weak, sales reached a record high.
Sales increased considerably in the Oil & Gas segment thanks above all to the higher oil price and a rise in volumes in the Natural Gas Trading business sector.
Sales in Other increased slightly, in particular as a result of higher prices for fertilizers. In contrast, sales decreased in raw materials trading and in Styrenics.
| 2008 | 2,788 | +19% |
|---|---|---|
| 2007 | 2,348 | |
| 2008 | 2,592 | +4% |
| 2007 | 2,497 | |
| 2008 | 2,370 | +5% |
| 2007 | 2,254 | |
| 2008 | 2,479 | +1% |
| 2007 | 2,448 | |
| 2008 | 636 | +11% |
| 2007 | 574 | |
| 2008 | 3,182 | +46% |
| 2007 | 2,185 | |
| 2008 | 1,725 | +4% |
| 2007 | 1,657 | |
The segments (excluding Other) posted a 7% increase in earnings despite a further rise in raw material costs, declining demand from key consumer industries and the hurricanes on the U.S. Gulf Coast. The hurricanes decreased earnings by more than \$100 million. BASF Group EBIT before special items decreased by approximately 8% to €1,568 million, in particular due to significantly lower earnings in Other.
Earnings declined in the Chemicals segment, primarily as a result of lower margins for cracker products as well as plant shutdowns due to the hurricanes on the U.S. Gulf Coast. In the Inorganics division, we increased earnings thanks to higher margins for basic chemicals.
In the Plastics segment, due to the slowdown in the automotive and construction industries, the huge increase in raw material costs could not be sufficiently passed on to the market. In addition, earnings were negatively affected by plant shutdowns due to the hurricanes.
In the Performance Products segment, we increased earnings significantly thanks to the strong performance of Care Chemicals and a reduction in fixed costs.
In the Functional Solutions segment, earnings declined in the Construction Chemicals and Coatings divisions. Higher raw material costs could not be fully passed on to the market. The increase in earnings of Catalysts was not sufficient to compensate for this.
Earnings in the Agricultural Solutions segment rose considerably. We recorded significant increases with our innovative and yield-increasing products, particularly in Europe and South America.
Earnings in the Oil & Gas segment grew considerably. In Exploration & Production, a substantial increase in earnings was primarily attributable to the oil price, which was higher than in the third quarter of 2007. Earnings in Natural Gas Trading were negative as a result of the time lag in adjusting sales prices to purchase prices.
Earnings in Other declined sharply, primarily due to expenses from hedging naphtha purchases against increasing prices.
| Chemicals | 2008 | 396 | (11%) | ||
|---|---|---|---|---|---|
| 2007 | 446 | ||||
| Plastics | 2008 | 198 | (34%) | ||
| 2007 | 299 | ||||
| Performance | 2008 | 233 | +34% | ||
| Products | 2007 | 174 | |||
| Functional | 2008 | 117 | (24%) | ||
| Solutions | 2007 | 153 | |||
| Agricultural | 2008 | 31 | .% | ||
| Solutions | 2007 | (5) | |||
| Oil & Gas | 2008 | 870 | +31% | ||
| 2007 | 662 | ||||
| Other | 2008 | (277) | .% | ||
| 2007 | (24) |
Special charges of €59 million were related to restructuring measures. In the third quarter of 2007, earnings included special income from the sale of our interest in an ethane cracker in Geismar, Louisiana.
Compared with the third quarter of 2007, EBIT decreased 11% to €1,509 million. EBITDA declined by 8% to €2,171 million.
The financial result improved by €66 million to €(39) million. Income before taxes and minority interests was down 7% in the third quarter to €1,470 million.
At 46%, the tax rate was around 25 percentage points above the figure for the third quarter of 2007. This was due to the higher level of income taxes for oil production that are non-compensable with German corporate income tax and a non-recurring, non-cash income of €186 million that resulted from the German Corporate Tax Reform in the third quarter of 2007.
Net income decreased by 38% to €758 million. Earnings per share were €0.82 in the third quarter compared with €1.25 in the same period of 2007. ///
| 3rd Quarter 2008 | January – September 2008 | |
|---|---|---|
| Performance (with dividends reinvested) | ||
| BASF % |
(23.0) | (30.6) |
| DAX 30 % |
(9.2) | (27.7) |
| DJ EURO STOXX 50 % |
(9.1) | (29.0) |
| DJ Chemicals % |
(25.0) | (23.1) |
| MSCI World Chemicals % |
(23.9) | (23.1) |
| Share prices and trading (XETRA), adjusted for two-for-one stock split | ||
| Average € |
39.30 | 43.08 |
| High € |
43.82 | 52.41 |
| Low € |
32.81 | 32.81 |
| Close (end of period) € |
33.75 | 33.75 |
| Average daily trade Million shares |
5.94 | 6.31 |
| Outstanding shares (end of period)1 Million shares |
919.12 | 919.12 |
| Market capitalization (end of period)1 Billion € |
31.0 | 31.0 |
After deduction of 4 million shares bought back and earmarked for cancellation
At €33.75, BASF's share price at the end of the third quarter was significantly lower than the closing price at the end of the previous quarter. Toward the end of the quarter in particular, stock markets declined substantially as a result of the financial crisis and a weaker economic outlook. For example, the DAX 30 and DJ EURO STOXX 50 indices decreased by 9.2% and 9.1%, respectively, in the third quarter. The DJ Chemicals and MSCI World Chemicals global industry indices fell by 25% and 23.9%, respectively, over the same period.
We aim to continue to increase our dividend each year, or at least maintain it at the previous year's level.
In the third quarter of 2008, we purchased BASF shares for a total of €496 million at an average price of €38.82 per share under our €3 billion buyback program. The shares will be canceled and the share capital of BASF SE reduced accordingly.
Thanks to its sound level of equity and high operating cash flow, BASF has a very good rating compared with its competitors in the chemical industry. Despite the tense situation on credit markets, BASF therefore had no difficulty in obtaining financing through commercial paper. Alternatively, we have committed and as yet unused credit lines at our disposal. We have negotiated a further credit line to finance the planned acquisition of Ciba Holding AG. Our medium to long-term debt financing is based on corporate bonds with a balanced maturity profile. ///
BASF SE made a public tender offer to shareholders of Ciba Holding AG on October 1, 2008, offering CHF 50.00 in cash for each nominal share. The offer period expired on October 28, 2008.
On October 24, 2008, Wintershall and Revus Energy ASA, Norway, signed a transaction agreement. Wintershall is offering Revus Energy shareholders NOK 110.00 in cash per share. The takeover offer to shareholders will be published following approval by the Oslo Stock Exchange. In particular, this acquisition is intended to reinforce oil reserves in the BASF Oil & Gas segment.
As part of the divestment process announced the previous year for significant parts of its global styrenics activities, BASF will be expanding the scope of the activities to be sold to include the styrene copolymer business. BASF will concentrate its remaining styrenic plastics activities on its foams business for the construction and packaging industries.
The effects of the global financial crisis on our sales markets and supply markets were greatly intensified towards the end of the quarter. Declining demand in key markets, the reduction of inventories by our customers, and the fast and drastic decline in the oil price indicate a recessive development that is likely to be intensified even further in 2009. Any forecasts therefore involve a great deal of uncertainty.
We are now basing our outlook for 2008 on the following assumptions:
Chemical production growth (excluding Pharmaceuticals) of under 2.0% (previously: 2.4%)
An average oil price (Brent) of \$105 per barrel (previously: \$120 per barrel)
In view of these underlying conditions and based on the assumption that there will be no further adverse developments that cannot be foreseen at present, we will increase sales in 2008 and make every effort to match the excellent EBIT before special items recorded the previous year. This aim now poses an even greater challenge than just a few weeks ago, and it will take a particular effort to achieve it.
We are pushing ahead with our programs for operational excellence. In October, in addition to our ongoing cost-cutting measures, we launched a program called NEXT comprising a large number of measures to improve efficiency. We anticipate a positive earnings contribution of more than €1 billion per year as of 2012, a large proportion of which we expect to achieve as early as 2009 and 2010.
In the short term, we aim to further improve our good operating cash flow and reduce our current assets. To this end, we have adjusted the capacity utilization of production plants and brought forward maintenance-related shutdowns.
We will be retaining our conservative financing policy. Our balance sheet is perfectly healthy and is enabling us to continue following our strategy of value-added growth. Our priorities remain as follows:
| 3rd Quarter | January – September | ||||||
|---|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
||
| Sales | 2,788 | 2,348 | 19 | 8,212 | 7,072 | 16 | |
| Thereof Inorganics | 378 | 294 | 29 | 1,048 | 887 | 18 | |
| Petrochemicals | 1,759 | 1,430 | 23 | 5,182 | 4,339 | 19 | |
| Intermediates | 651 | 624 | 4 | 1,982 | 1,846 | 7 | |
| Sales including intersegmental transfers | 4,401 | 3,535 | 24 | 12,594 | 10,683 | 18 | |
| EBITDA | 530 | 595 | (11) | 1,695 | 1,974 | (14) | |
| EBITDA in percent of sales | 19.0 | 25.3 | – | 20.6 | 27.9 | – | |
| EBIT before special items | 396 | 446 | (11) | 1,298 | 1,585 | (18) | |
| EBIT | 396 | 475 | (17) | 1,298 | 1,614 | (20) | |
| Assets | 6,516 | 5,687 | 15 | – | - | – | |
| Research expenses | 34 | 31 | 10 | 95 | 89 | 7 | |
| Additions to property, plant and equipment and intangible assets | 134 | 147 | (9) | 364 | 417 | (13) |
The significant sales growth in the Chemicals segment was mainly the result of higher prices (volumes 3%, prices 21%, currencies –5%). Earnings declined, in particular as a result of low margins for cracker products, declining demand during the course of the third quarter and shutdowns of numerous plants due to the hurricanes on the U.S. Gulf Coast.
The huge rise in sales was primarily due to price increases that were necessary as a result of higher raw material and energy costs. In addition, we recorded increased volumes in the majority of our product portfolio. Toward the end of the third quarter, there was a decline in demand for glues, impregnating resins and electronic chemicals. We have substantially improved our margins for ammonia and urea. As a result, earnings increased substantially overall.
Higher volumes and significant increases in sales prices led to a substantial rise in sales. The profitability of cracker products was improved in Europe, while margins for cracker products in North America and Asia remained totally insufficient due to weaker demand. Together with the plant shutdowns due to the hurricanes on the U.S. Gulf Coast, this led to a substantial decline in earnings.
Sales rose slightly due to higher prices. Thanks to the strong demand for amines and carboxylic acids, it was possible to pass on higher raw material costs. In the case of butanediol and derivatives, the stagnating demand for PolyTHFTM and new capacities opened by Asian competitors made it difficult to raise prices. Moreover, the hurricanes on the U.S. Gulf Coast also led to plant shutdowns and a loss of business in the Intermediates division. Earnings were therefore lower than in the same quarter of 2007. ///
Change compared with 3rd quarter of 2007
+19% –11%
| 3rd Quarter | January – September | ||||||
|---|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
||
| Sales | 2,592 | 2,497 | 4 | 7,793 | 7,504 | 4 | |
| Thereof Performance Polymers | 1,236 | 1,169 | 6 | 3,716 | 3,668 | 1 | |
| Polyurethanes | 1,356 | 1,328 | 2 | 4,077 | 3,836 | 6 | |
| Sales including intersegmental transfers | 2,755 | 2,707 | 2 | 8,328 | 8,135 | 2 | |
| EBITDA | 300 | 402 | (25) | 1,151 | 1,262 | (9) | |
| EBITDA in percent of sales | 11.6 | 16.1 | – | 14.8 | 16.8 | – | |
| EBIT before special items | 198 | 299 | (34) | 848 | 953 | (11) | |
| EBIT | 194 | 297 | (35) | 843 | 949 | (11) | |
| Assets | 5,887 | 5,575 | 6 | – | - | – | |
| Research expenses | 39 | 40 | (3) | 108 | 108 | – | |
| Additions to property, plant and equipment and intangible assets | 122 | 121 | 1 | 306 | 332 | (8) |
Sales in the Plastics segment increased compared with the third quarter of 2007, despite the decreasingly dynamic market, due to higher volumes and sales prices (volumes 2%, prices 7%, currencies –5%). Earnings declined considerably because higher raw material costs could not be passed on sufficiently due to the slowdown in the automotive and construction industries. In addition, earnings were reduced by plant shutdowns due to hurricanes in the USA.
Performance Polymers recorded higher sales than in the same quarter of 2007. However, demand declined during the course of the third quarter, especially in North America. In Asia, sales of Styropor® for the packaging industry as well as caprolactam for textile applications declined. In the USA and increasingly also in Europe and Japan, there was increasing consumer reticence in the automotive industry. This had a negative effect on our Ultramid® business. Overall, the dramatic increase in raw materials and energy costs could not be sufficiently passed on in the form of price increases. In conjunction with the hurricane-related plant shutdowns in the USA, this led to a significant decline in earnings.
Sales in the Polyurethanes division were slightly higher than in the same quarter of 2007. As volumes remained stable, negative currency effects could be more than offset by higher prices. Business development in the third quarter was shaped by the slowdown in key industries, namely automotive and construction. On top of this came shutdowns due to the hurricanes on the U.S. Gulf Coast. In Asia, business was affected by transport restrictions for our products and production restrictions for our customers in the run-up to the Olympic Games. In Europe, volumes and sales were slightly higher than in the third quarter of 2007. Earnings came in below the high level achieved in the same period of 2007. ///
Change compared with 3rd quarter of 2007
| 3rd Quarter | January – September | ||||||
|---|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
||
| Sales | 2,370 | 2,254 | 5 | 6,873 | 6,748 | 2 | |
| Thereof Acrylics & Dispersions | 981 | 918 | 7 | 2,771 | 2,671 | 4 | |
| Care Chemicals | 795 | 749 | 6 | 2,339 | 2,313 | 1 | |
| Performance Chemicals | 594 | 587 | 1 | 1,763 | 1,764 | – | |
| Sales including intersegmental transfers | 2,489 | 2,341 | 6 | 7,203 | 7,005 | 3 | |
| EBITDA | 349 | 288 | 21 | 1,045 | 887 | 18 | |
| EBITDA in percent of sales | 14.7 | 12.8 | – | 15.2 | 13.1 | – | |
| EBIT before special items | 233 | 174 | 34 | 682 | 563 | 21 | |
| EBIT | 233 | 170 | 37 | 713 | 544 | 31 | |
| Assets | 6,657 | 6,597 | 1 | – | - | – | |
| Research expenses | 60 | 66 | (9) | 173 | 202 | (14) | |
| Additions to property, plant and equipment and intangible assets | 108 | 100 | 8 | 288 | 295 | (2) |
Sales in this segment were higher than in the third quarter of 2007, mainly as a result of higher prices (volumes 1%, prices 11%, portfolio –3%, currencies –4%). Thanks to another strong performance by Care Chemicals and reduced fixed costs, earnings increased substantially.
Higher prices resulted in increased sales compared with the same quarter of 2007. We recorded strong growth and stabilized margins for acrylic monomers. Although sales rose substantially in polymers for construction, architectural coatings and fiber bonding, the price increases were not sufficient to make up for the increase in raw material costs. Earnings continued to decline in paper chemicals and kaolin minerals. The division's earnings were significantly lower than in the third quarter of 2007.
Despite divestment-related decreases, sales were up on the figure for the same quarter last year. We recorded growth in vitamins, sun care products and skin care products as a result of higher prices, and for detergents and formulators due to higher prices and volumes. The considerable increase in earnings was thanks not only to higher prices but also to reduced fixed costs resulting from the measures taken in previous years to increase efficiency.
Sales were slightly higher than in the third quarter of 2007. Negative currency effects were offset by higher volumes and, most importantly, prices. In particular, we posted higher volumes of refinery and oilfield chemicals. The weaker economic environment had a detrimental effect on business development for coating and plastic chemicals as well as for textile and leather chemicals. Thanks to reduced fixed costs, earnings only declined slightly. ///
Change compared with 3rd quarter of 2007
before special items
+5% +34%
| 3rd Quarter | January – September | ||||||
|---|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
||
| Sales | 2,479 | 2,448 | 1 | 7,363 | 7,166 | 3 | |
| Thereof Catalysts | 1,225 | 1,248 | (2) | 3,803 | 3,673 | 4 | |
| Construction Chemicals | 621 | 555 | 12 | 1,639 | 1,571 | 4 | |
| Coatings | 633 | 645 | (2) | 1,921 | 1,922 | – | |
| Sales including intersegmental transfers | 2,520 | 2,475 | 2 | 7,480 | 7,271 | 3 | |
| EBITDA | 200 | 247 | (19) | 620 | 721 | (14) | |
| EBITDA in percent of sales | 8.1 | 10.1 | – | 8.4 | 10.1 | – | |
| EBIT before special items | 117 | 153 | (24) | 368 | 472 | (22) | |
| EBIT | 112 | 151 | (26) | 357 | 443 | (19) | |
| Assets | 9,170 | 8,849 | 4 | – | – | – | |
| Research expenses | 46 | 50 | (8) | 140 | 141 | (1) | |
| Additions to property, plant and equipment and intangible assets | 56 | 67 | (16) | 138 | 146 | (5) |
The segment posted a slight increase in sales, despite the greatly declining demand in the automotive and construction industries (volumes –1%, prices 6%, portfolio 1%, currencies –5%). Overall, earnings decreased significantly. The increase in earnings in the Catalysts division was not able to offset declines in Construction Chemicals and Coatings.
Due to negative currency effects, sales in the Catalysts division were slightly lower than in the third quarter of 2007. Precious metals trading contributed €662 million (third quarter 2007: €635 million) to sales. Sales growth in chemical catalysts was unable to offset declines in the emissioncontrol catalysts business. The declining demand in the automotive sector and the trend toward smaller vehicles in North America are having an increasing effect. Earnings were considerably higher than in the third quarter of 2007, as a result of the higher contributions from chemical catalysts and precious metals trading.
Sales increased as a result of higher volumes and prices, in particular in Eastern Europe, the Middle East, and many parts of Asia. Sales decreased in North America, Spain and Japan as a result of the weak construction markets. Earnings were considerably lower than in the same quarter of 2007, above all due to large increases in raw material and transportation costs.
Sales were slightly lower than in the third quarter of 2007. This was primarily the result of declines in automotive and refinish coatings, especially in North America, but also in Europe and Asia. In South America, we substantially increased sales of architectural coatings and automotive coatings. Earnings were much lower than in the third quarter of 2007. This was primarily due to the decline in automotive and refinish coatings as a result of the weaker economy. ///
Change compared with 3rd quarter of 2007
| 3rd Quarter | January – September 2008 | ||||||
|---|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
||
| Sales | 636 | 574 | 11 | 2,741 | 2,428 | 13 | |
| Sales including intersegmental transfers | 637 | 577 | 10 | 2,753 | 2,437 | 13 | |
| EBITDA | 78 | 46 | 70 | 806 | 610 | 32 | |
| EBITDA in percent of sales | 12.3 | 8.0 | – | 29.4 | 25.1 | – | |
| EBIT before special items | 31 | (5) | 653 | 467 | 40 | ||
| EBIT | 31 | (5) | 653 | 462 | 41 | ||
| Assets | 4,178 | 4,199 | (1) | – | – | – | |
| Research expenses | 82 | 79 | 4 | 236 | 234 | 1 | |
| Additions to property, plant and equipment and intangible assets | 25 | 20 | 25 | 70 | 55 | 27 |
Thanks to strong demand for agricultural products worldwide, we were able to achieve large volume and price increases with our innovative crop protection agents that lead to increased yields (volumes 8%, prices 8%, portfolio 1%, currencies –6%). Although the third quarter generally tends to be weak due to the seasonal nature of the business, sales and earnings increased substantially and reached record values.
In Europe, the specialty crop business developed particularly well. This was the result of the substantial infestation of vines as well as the successful introduction of products containing our boscalid fungicide active ingredient for vegetables. In addition, the beginning of the fall business in canola (oilseed rape), especially in Central and Eastern Europe, supported the positive development in the region.
In North America, the non-crop application business remained under pressure. Tough competition for forestry products and reduced demand for products to combat termites in buildings had a detrimental effect.
In Asia we recorded strong demand for our insecticides and fungicides. This sales growth is due in particular to the good business performance in Japan. Our insecticides containing the active ingredients fipronil and chlorfenapyr were particularly successful.
The season got off to a good start in South America, where we recorded high growth rates in all indications. In Brazil, in particular, we benefited from strong demand for our seed treatment product Standak® with the insecticide active ingredient fipronil as well as for our AgCelence® soybean fungicide Opera® with the active ingredient F 500®.
The EU Commission's Standing Committee on the Food Chain and Animal Health approved the Annex I re-registration of five BASF crop protection compounds following the positive assessment of the European Food and Safety Authority (EFSA). The decision, expected to take effect at the end of 2008, concerns the two fungicides epoxiconazole and fenpropimorph as well as the herbicide active ingredient metazachlor. Inclusion in Annex I means that the active ingredient is given Europe-wide approval valid for a period of 10 years. ///
Change compared with 3rd quarter of 2007
+11% +€36m
| 3rd Quarter | January – September | |||||||
|---|---|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
|||
| Sales | 3,182 | 2,185 | 46 | 10,127 | 7,424 | 36 | ||
| Thereof Exploration & Production | 1,415 | 1,044 | 36 | 4,186 | 3,160 | 32 | ||
| Natural Gas Trading | 1,767 | 1,141 | 55 | 5,941 | 4,264 | 39 | ||
| Sales including intersegmental transfers | 3,481 | 2,470 | 41 | 11,039 | 8,273 | 33 | ||
| EBITDA | 1,011 | 785 | 29 | 3,296 | 2,596 | 27 | ||
| Thereof Exploration & Production | 1,011 | 705 | 43 | 3,007 | 2,080 | 45 | ||
| Natural Gas Trading | 80 | (100) | 289 | 516 | (44) | |||
| EBITDA in percent of sales | 31.8 | 35.9 | – | 32.5 | 35.0 | – | ||
| EBIT before special items | 870 | 662 | 31 | 2,880 | 2,222 | 30 | ||
| Thereof Exploration & Production | 905 | 622 | 45 | 2,697 | 1,814 | 49 | ||
| Natural Gas Trading | (35) | 40 | 183 | 408 | (55) | |||
| EBIT | 870 | 662 | 31 | 2,880 | 2,222 | 30 | ||
| Thereof Exploration & Production | 905 | 622 | 45 | 2,697 | 1,814 | 49 | ||
| Natural Gas Trading | (35) | 40 | 183 | 408 | (55) | |||
| Assets | 7,218 | 4,818 | 50 | – | – | – | ||
| Thereof Exploration & Production | 4,005 | 2,165 | 85 | – | – | – | ||
| Natural Gas Trading | 3,213 | 2,653 | 21 | – | – | – | ||
| Exploration expenses | 74 | 31 | 139 | 182 | 131 | 39 | ||
| Additions to property, plant and equipment and intangible assets | 140 | 129 | 9 | 398 | 308 | 29 |
Sales increased considerably in the Oil & Gas segment, above all thanks to the higher crude oil price (prices/currencies 46%). The substantially higher earnings contributed by Exploration & Production were able to more than compensate for the negative earnings that were posted in Natural Gas Trading as a result of price mechanisms.
In Exploration & Production, additional volumes from gas production in Russia, in particular from the Yuzhno Russkoye natural gas field, more than made up for the decline in oil production, which was temporarily affected by the shutdown of an offshore platform in Libya. On a global scale, exploration expenses were more than doubled.
Compared with the third quarter of 2007, the average price of Brent crude increased by around \$40 to \$115 per barrel. In euro terms, the oil price increased by around €22 to over €76 per barrel. Earnings rose by 45%, primarily due to higher oil prices and as a result of higher gas production.
We again increased volumes in Natural Gas Trading. The delayed adjustment of sales prices to purchase prices once again had a detrimental effect on margins in the third quarter. As a result, earnings were significantly lower than in the same quarter of 2007 and were negative. ///
Further information on the Oil & Gas segment can be found in the Notes on page 21.
Change compared with 3rd quarter of 2007
sales ebit
+46% +31%
| Sales by location of company |
Sales by location of customer |
EBIT before special items | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
||
| 3rd Quarter | ||||||||||
| Europe | 9,484 | 7,900 | 20 | 8,875 | 7,406 | 20 | 1,260 | 1,208 | 4 | |
| Thereof Germany | 6,524 | 5,539 | 18 | 3,139 | 2,680 | 17 | 1,017 | 930 | 9 | |
| North America | 3,058 | 3,041 | 1 | 3,133 | 3,008 | 4 | 62 | 198 | (69) | |
| Asia Pacific | 2,319 | 2,236 | 4 | 2,482 | 2,443 | 2 | 129 | 218 | (41) | |
| South America, Africa, Middle East | 911 | 786 | 16 | 1,282 | 1,106 | 16 | 117 | 81 | 44 | |
| 15,772 | 13,963 | 13 | 15,772 | 13,963 | 13 | 1,568 | 1,705 | (8) | ||
| January – September | ||||||||||
| Europe | 29,445 | 25,328 | 16 | 27,854 | 23,842 | 17 | 4,976 | 4,319 | 15 | |
| Thereof Germany | 20,625 | 17,879 | 15 | 10,319 | 8,732 | 18 | 3,813 | 3,221 | 18 | |
| North America | 9,342 | 9,379 | 9,359 | 9,333 | 505 | 742 | (32) | |||
| Asia Pacific | 6,908 | 6,491 | 6 | 7,434 | 7,095 | 5 | 583 | 598 | (3) | |
| South America, Africa, Middle East | 2,303 | 2,053 | 12 | 3,351 | 2,981 | 12 | 266 | 192 | 39 | |
| 47,998 | 43,251 | 11 | 47,998 | 43,251 | 11 | 6,330 | 5,851 | 8 |
Sales by location of company in Europe increased by 20%. EBIT before special items increased by €52 million to €1,260 million. The Oil & Gas segment posted higher sales and earnings mainly due to the rise in oil prices. Earnings in the Chemicals segment increased thanks to higher margins for cracker products in the Petrochemicals division and for basic chemicals in the Inorganics division. Sales and earnings in Agricultural Solutions were increased especially in the area of specialty crops.
Sales by companies in North America increased by 10% in dollar terms and by 1% in euro terms. EBIT before special items decreased by €136 million to €62 million. This extraordinarily large decline was above all due to low margins in Petrochemicals and plant shutdowns as a result of hurricanes on the U.S. Gulf Coast that reduced earnings by more than \$100 million. Care Chemicals and Catalysts posted higher earnings.
In Asia Pacific, sales increased by 11% in local currency terms and by 4% in euro terms. EBIT before special items decreased by €89 million to €129 million. The decline in earnings in the Chemicals segments was primarily due to very low margins for cracker products. Butanediol and derivatives in the Intermediates division are suffering from weak demand, just like all other precursors for the textiles industry. In the Performance Products segment, earnings increased substantially as a result of growth in Acrylics & Dispersions and Performance Chemicals.
Sales in South America, Africa, Middle East were increased by 20% in local currency terms and by 16% in euro terms. EBIT before special items increased by €36 million to €117 million. There was strong demand for crop protection agents, architectural coatings and automotive coatings, in particular in Brazil, as well as for construction chemicals in the Middle East. ///
Thanks to its high nitrogen content, BASF's thermoset foam, Basotect® UF, has attained the highest possible rating for organic insulating materials according to the new, more stringent EU fire-protection standards for buildings and trains. By meeting these standards, Basotect UF gives engineers and processors in all European countries the planning reliability needed to design the insulation of buildings and railroad vehicles.
On September 2, 2008, BASF Plant Science and VIB (the Flanders Institute for Biotechnology) signed a major cooperation agreement, the duration of which has initially been set at three years. The focus is on plant genetic mechanisms that increase yield and improve tolerance to environmental stress such as drought and cold. The project is combining the approach of researchers at VIB and Ghent University with the approach of researchers at CropDesign, a subsidiary of BASF Plant Science. This allows for a broad and detailed analysis, meaning that genes that have passed the whole process are likely to improve crop yield in the field.
BASF experts in catalysis research have developed a new catalyst for the Fischer-Tropsch synthesis for the conversion of synthesis gas (carbon monoxide and hydrogen) into hydrocarbons that allows the dedicated production of olefins for the company's production Verbund. The successful further development of the Fischer-Tropsch synthesis may become an attractive alternative to cracker technology and expand BASF's base of raw materials, as synthesis gas can be gained both from the fossil raw materials – oil, gas and coal – and from renewable resources.
Compared with the end of 2007, the number of BASF Group employees increased by 1,520 to 96,695 as of September 30, 2008. On this date, 64% of BASF Group employees worked in Europe; 16% in North America; 14% in Asia Pacific; and 6% in South America, Africa, Middle East. From January to September 2008, personnel costs decreased by 2.5% compared to the same period of 2007 to €4,766 million. ///
| Sept. 30, 2008 |
Dec. 31, 2007 |
Change in % |
|
|---|---|---|---|
| Europe | 61,745 | 61,020 | 1 |
| North America | 15,246 | 15,191 | – |
| Asia Pacific | 13,599 | 13,278 | 2 |
| South America, Africa, Middle East |
6,105 | 5,686 | 7 |
| 96,695 | 95,175 | 2 |
| 3rd Quarter January – September |
||||||||
|---|---|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
|||
| Sales | 15,772 | 13,963 | 13.0 | 47,998 | 43,251 | 11.0 | ||
| Cost of sales | 11,727 | 10,182 | 15.2 | 35,138 | 31,056 | 13.1 | ||
| Gross profit on sales | 4,045 | 3,781 | 7.0 | 12,860 | 12,195 | 5.5 | ||
| Selling expenses | 1,466 | 1,372 | 6.9 | 4,258 | 4,082 | 4.3 | ||
| General and administrative expenses | 252 | 260 | (3.1) | 777 | 782 | (0.6) | ||
| Research expenses | 334 | 346 | (3.5) | 1,001 | 1,028 | (2.6) | ||
| Other operating income | 136 | 197 | (31.0) | 729 | 536 | 36.0 | ||
| Other operating expenses | 620 | 311 | 99.4 | 1,382 | 1,133 | 22.0 | ||
| Income from operations | 1,509 | 1,689 | (10.7) | 6,171 | 5,706 | 8.1 | ||
| Income from companies accounted for using the equity method | 21 | 1 | 32 | 43 | (25.6) | |||
| Other income from participations | 15 | 18 | (16.7) | 55 | 47 | 17.0 | ||
| Interest expense | 140 | 152 | (7.9) | 433 | 455 | (4.8) | ||
| Interest income | 39 | 31 | 25.8 | 122 | 97 | 25.8 | ||
| Other financial result | 26 | (3) | 25 | 4 | ||||
| Financial result | (39) | (105) | 62.9 | (199) | (264) | 24.6 | ||
| Income before taxes and minority interests | 1,470 | 1,584 | (7.2) | 5,972 | 5,442 | 9.7 | ||
| Income taxes | 670 | 325 | 106.2 | 2,519 | 1,971 | 27.8 | ||
| Income before minority interests | 800 | 1,259 | (36.5) | 3,453 | 3,471 | (0.5) | ||
| Minority interests | 42 | 46 | (8.7) | 228 | 199 | 14.6 | ||
| Net income | 758 | 1,213 | (37.5) | 3,225 | 3,272 | (1.4) | ||
| Earnings per share (€) 1 | ||||||||
| Undiluted | 0.82 | 1.25 | (34.4) | 3.45 | 3.33 | 3.6 | ||
| Diluted | 0.82 | 1.25 | (34.4) | 3.45 | 3.33 | 3.6 |
1 Adjusted to the two-for-one stock split; information on determining earnings per share can be found in note 7 on page 23.
| Sept. 30, 2008 |
Sept. 30, 2007 |
Change in % |
Dec. 31, 2007 |
Change in % |
|
|---|---|---|---|---|---|
| Long-term assets | |||||
| Intangible assets | 9,227 | 8,278 | 11.5 | 9,559 | (3.5) |
| Property, plant and equipment | 14,329 | 14,571 | (1.7) | 14,215 | 0.8 |
| Investments accounted for using the equity method | 1,011 | 649 | 55.8 | 834 | 21.2 |
| Other financial assets | 1,855 | 1,404 | 32.1 | 1,952 | (5.0) |
| Deferred taxes | 612 | 452 | 35.4 | 679 | (9.9) |
| Other long-term assets | 708 | 1,355 | (47.7) | 655 | 8.1 |
| 27,742 | 26,709 | 3.9 | 27,894 | (0.5) | |
| Short-term assets | |||||
| Inventories | 7,716 | 6,549 | 17.8 | 6,578 | 17.3 |
| Accounts receivable, trade | 9,199 | 8,246 | 11.6 | 8,561 | 7.5 |
| Other receivables and miscellaneous short-term assets | 3,219 | 2,284 | 40.9 | 2,337 | 37.7 |
| Marketable securities | 45 | 55 | (18.2) | 51 | (11.8) |
| Cash and cash equivalents | 944 | 1,460 | (35.3) | 767 | 23.1 |
| Assets of disposal groups | 656 | – | – | 614 | 6.8 |
| 21,779 | 18,594 | 17.1 | 18,908 | 15.2 | |
| Total assets | 49,521 | 45,303 | 9.3 | 46,802 | 5.8 |
| Sept. 30, 2008 |
Sept. 30, 2007 |
Change in % |
Dec. 31, 2007 |
Change in % |
|
|---|---|---|---|---|---|
| Stockholders' equity | |||||
| Subscribed capital | 1,176 | 1,241 | (5.2) | 1,224 | (3.9) |
| Capital surplus | 3,247 | 3,180 | 2.1 | 3,173 | 2.3 |
| Retained earnings | 14,065 | 14,186 | (0.9) | 14,556 | (3.4) |
| Other comprehensive income | 196 | 308 | (36.4) | 174 | 12.6 |
| Minority interests | 1,154 | 615 | 87.6 | 971 | 18.8 |
| 19,838 | 19,530 | 1.6 | 20,098 | (1.3) | |
| Long-term liabilities | |||||
| Provisions for pensions and similar obligations | 1,423 | 1,251 | 13.7 | 1,292 | 10.1 |
| Other provisions | 2,831 | 3,067 | (7.7) | 3,015 | (6.1) |
| Deferred taxes | 1,900 | 1,456 | 30.5 | 2,060 | (7.8) |
| Financial indebtedness | 7,261 | 7,000 | 3.7 | 6,954 | 4.4 |
| Other long-term liabilities | 923 | 989 | (6.7) | 901 | 2.4 |
| 14,338 | 13,763 | 4.2 | 14,222 | 0.8 | |
| Short-term liabilities | |||||
| Accounts payable, trade | 3,749 | 3,574 | 4.9 | 3,763 | (0.4) |
| Provisions | 2,873 | 2,633 | 9.1 | 2,697 | 6.5 |
| Tax liabilities | 1,170 | 1,064 | 10.0 | 881 | 32.8 |
| Financial indebtedness | 4,842 | 2,947 | 64.3 | 3,148 | 53.8 |
| Other short-term liabilities | 2,691 | 1,792 | 50.2 | 1,976 | 36.2 |
| Liabilities of disposal groups | 20 | – | – | 17 | 17.6 |
| 15,345 | 12,010 | 27.8 | 12,482 | 22.9 | |
| Total stockholders' equity and liabilities | 49,521 | 45,303 | 9.3 | 46,802 | 5.8 |
| January – September | ||
|---|---|---|
| 2008 | 2007 | |
| Net income | 3,225 | 3,272 |
| Depreciation and amortization of long-term assets | 1,997 | 1,985 |
| Changes in net working capital | (1,619) | (979) |
| Miscellaneous items | (26) | 21 |
| Cash provided by operating activities | 3,577 | 4,299 |
| Payments related to property, plant and equipment and intangible assets | (1,643) | (1,672) |
| Acquisitions/divestitures | (25) | 37 |
| Financial investments and other items | 96 | 54 |
| Cash used in investing activities | (1,572) | (1,581) |
| Proceeds from capital increases/repayments | (1,496) | (1,301) |
| Changes in financial liabilities | 1,638 | 798 |
| Dividends | (1,990) | (1,573) |
| Cash used in financing activities | (1,848) | (2,076) |
| Net changes in cash and cash equivalents | 157 | 642 |
| Cash and cash equivalents as of beginning of year and other changes | 787 | 818 |
| Cash and cash equivalents at end of period | 944 | 1,460 |
At €3,577 million, cash provided by operating activities from January to September 2008 was €722 million lower than in the same period of 2007. This was primarily the result of an increase in capital tied up in inventories, above all due to higher raw material prices.
A total of €1,572 million were used in investing activities in the first nine months, which is approximately at the same level as in the same period of 2007. Payments related to property, plant and equipment and intangible assets were slightly lower than in the same period of 2007 and were significantly lower than amortization and depreciation.
The cash flow from financing activities amounted to €(1,848) million. Dividends amounting to €1,831 million were paid out to shareholders of BASF SE, while minority shareholders in Group companies received €159 million.
We used €1,596 million to buy back shares. Taking the stock split into account, BASF bought back 37.3 million shares at an average price of €42.85 per share in the first nine months of the year.
Cash and cash equivalents amounted to €944 million as of September 30, 2008, compared with €767 million at the end of 2007. In the same period, financial indebtedness rose by €2,001 million to €12,103 million, primarily as a result of issuing commercial paper. Compared with yearend 2007, net debt increased by €1,824 million to €11,159 million. The equity ratio on September 30, 2008 stood at 40%, compared with 43% at the end of the previous year. ///
| January – September | ||
|---|---|---|
| 2008 | 2007 | |
| Income before minority interests | 3,453 | 3,471 |
| Fair value changes in available-for-sale securities | 135 | 198 |
| Cash flow hedges | (102) | 44 |
| Foreign currency translation adjustments | (41) | (247) |
| Revaluation due to acquisition of majority of shares | (1) | |
| Actuarial gains/losses and asset ceiling for defined benefit plans | (218) | 752 |
| Deferred taxes | 32 | (363) |
| Minority interests | 22 | (26) |
| Total income and expense recognized directly in equity | (173) | 358 |
| Total income and expense for the period | 3,280 | 3,829 |
| Thereof BASF | 3,030 | 3,656 |
| Minority interests | 250 | 173 |
| Retained earnings | Other comprehensive income | Total income and expense reco gnized directly in equity |
|||||
|---|---|---|---|---|---|---|---|
| Actuarial gains/ losses and asset ceiling |
Foreign currency translation adjustments |
Fair value changes in available-for sale securities |
Cash flow hedges |
Revaluati on due to acquisition of majority of shares |
Total of other comprehen sive income |
||
| As of January 1, 2008 | (874) | (497) | 680 | (21) | 12 | 174 | (700) |
| Additions | – | – | 135 | – | – | 135 | 135 |
| Releases | (218) | (41) | – | (102) | (1) | (144) | (362) |
| Deferred taxes | 1 | 1 | (2) | 32 | – | 31 | 32 |
| As of September 30, 2008 | (1,091) | (537) | 813 | (91) | 11 | 196 | (895) |
| As of January 1, 2007 | (782) | 26 | 341 | (42) | – | 325 | (457) |
| Additions | 752 | – | 198 | – | – | 198 | 950 |
| Releases | – | (247) | – | 44 | – | (203) | (203) |
| Deferred taxes | (351) | 4 | (1) | (15) | – | (12) | (363) |
| As of September 30, 2007 | (381) | (217) | 538 | (13) | – | 308 | (73) |
| As of January 1, 2008 | Number of subscribed shares outstanding1 956,370,000 |
Subscribed capital 1,224 |
Capital surplus 3,173 |
Retained earnings 14,556 |
Other com prehensive income 174 |
Minority interests 971 |
Stockholders' equity 20,098 |
|---|---|---|---|---|---|---|---|
| Share buyback and cancellation of own shares including own shares intended to be cancelled |
(37,250,000) | (48) | 74 | (1,622) | – | – | (1,596) |
| Effects of acquisitions achieved in stages | – | – | – | (46) | – | (8) | (54) |
| Capital contribution by minority interests | – | – | – | – | – | 100 | 100 |
| Dividends paid | – | – | – | (1,831) | – | (159) | (1,990) |
| Net income | – | – | – | 3,225 | – | 228 | 3,453 |
| Income and expense recognized directly in equity |
– | – | – | (217) | 22 | 22 | (173) |
| Changes in scope of consolidation and other changes |
– | – | – | – | – | – | – |
| As of September 30, 2008 | 919,120,000 | 1,176 | 3,247 | 14,065 | 196 | 1,154 | 19,838 |
1 The number of outstanding shares was adjusted retrospectively because of the two-for-one stock split. More details can be found in note 10 on page 25.
| Number of subscribed shares out standing1 |
Subscribed capital |
Capital surplus |
Retained earnings |
Other com prehensive income |
Minority interests |
Stockholders' equity |
|
|---|---|---|---|---|---|---|---|
| As of January 1, 2007 | 999,360,000 | 1,279 | 3,141 | 13,302 | 325 | 531 | 18,578 |
| Share buyback and cancellation of own shares including own shares intended to be cancelled |
(29,990,000) | (38) | 42 | (1,305) | – | – | (1,301) |
| Capital contribution by minority interests | – | – | – | – | – | – | – |
| Dividends paid | – | – | – | (1,484) | – | (89) | (1,573) |
| Net income | – | – | – | 3,272 | – | 199 | 3,471 |
| Income and expense recognized directly in equity |
– | – | – | 401 | (17) | (26) | 358 |
| Changes in scope of consolidation and other changes |
– | – | (3) | – | – | – | (3) |
| As of September 30, 2007 | 969,370,000 | 1,241 | 3,180 | 14,186 | 308 | 615 | 19,530 |
1 The number of outstanding shares was adjusted retrospectively because of the two-for-one stock split. More details can be found in note 10 on page 25.
| Sales | EBITDA | Income from operations (EBIT) before special items |
Income from operations (EBIT) |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
2008 | 2007 | Change % |
2008 | 2007 | Change in % |
|
| Chemicals | 2,788 | 2,348 | 18.7 | 530 | 595 | (10.9) | 396 | 446 | (11.2) | 396 | 475 | (16.6) |
| Plastics | 2,592 | 2,497 | 3.8 | 300 | 402 | (25.4) | 198 | 299 | (33.8) | 194 | 297 | (34.7) |
| Performance Products | 2,370 | 2,254 | 5.1 | 349 | 288 | 21.2 | 233 | 174 | 33.9 | 233 | 170 | 37.1 |
| Functional Solutions | 2,479 | 2,448 | 1.3 | 200 | 247 | (19.0) | 117 | 153 | (23.5) | 112 | 151 | (25.8) |
| Agricultural Solutions | 636 | 574 | 10.8 | 78 | 46 | 69.6 | 31 | (5) | 31 | (5) | ||
| Oil & Gas | 3,182 | 2,185 | 45.6 | 1,011 | 785 | 28.8 | 870 | 662 | 31.4 | 870 | 662 | 31.4 |
| Other | 1,725 | 1,657 | 4.1 | (297) | (8) | (277) | (24) | (327) | (61) | |||
| 15,772 | 13,963 | 13.0 | 2,171 | 2,355 | (7.8) | 1,568 | 1,705 | (8.0) | 1,509 | 1,689 | (10.7) |
| Research expenses | Assets | Additions to long-term assets1 |
Amortization and depreciation2 |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
|
| Chemicals | 34 | 31 | 9.7 | 6,516 | 5,687 | 14.6 | 134 | 147 | (8.8) | 134 | 120 | 11.7 |
| Plastics | 39 | 40 | (2.5) | 5,887 | 5,575 | 5.6 | 122 | 121 | 0.8 | 106 | 105 | 1.0 |
| Performance Products | 60 | 66 | (9.1) | 6,657 | 6,597 | 0.9 | 108 | 100 | 8.0 | 116 | 118 | (1.7) |
| Functional Solutions | 46 | 50 | (8.0) | 9,170 | 8,849 | 3.6 | 56 | 67 | (16.4) | 88 | 96 | (8.3) |
| Agricultural Solutions | 82 | 79 | 3.8 | 4,178 | 4,199 | (0.5) | 25 | 20 | 25.0 | 47 | 51 | (7.8) |
| Oil & Gas | 3 | 1 | 200.0 | 7,218 | 4,818 | 49.8 | 140 | 129 | 8.5 | 141 | 123 | 14.6 |
| Other | 70 | 79 | (11.4) | 9,895 | 9,578 | 3.3 | 17 | 74 | (77.0) | 30 | 53 | (43.4) |
| 334 | 346 | (3.5) | 49,521 | 45,303 | 9.3 | 602 | 658 | –8.5 | 662 | 666 | (0.6) |
1 Investment in property, plant and equipment and intangible assets
2 Depreciation and amortization of property, plant and equipment and intangible assets
| 1st quarter | 2nd quarter | 3rd quarter | 4th quarter | Full year | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |
| Income from operations | (51) | (106) | (49) | (23) | (59) | (16) | (153) | (298) | ||
| Financial result | – | – | – | – | – | – | – | – | ||
| (51) | (106) | (49) | (23) | (59) | (16) | (153) | (298) |
(million €)
| Sales | EBITDA | Income from operations (EBIT) before special items |
Income from operations (EBIT) |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
2008 | 2007 | Cange in % |
2008 | 2007 | Change in % |
|
| Chemicals | 8,212 | 7,072 | 16.1 | 1,695 | 1,974 | (14.1) | 1,298 | 1,585 | (18.1) | 1,298 | 1,614 | (19.6) |
| Plastics | 7,793 | 7,504 | 3.9 | 1,151 | 1,262 | (8.8) | 848 | 953 | (11.0) | 843 | 949 | (11.2) |
| Performance Products | 6,873 | 6,748 | 1.9 | 1,045 | 887 | 17.8 | 682 | 563 | 21.1 | 713 | 544 | 31.1 |
| Functional Solutions | 7,363 | 7,166 | 2.7 | 620 | 721 | (14.0) | 368 | 472 | (22.0) | 357 | 443 | (19.4) |
| Agricultural Solutions | 2,741 | 2,428 | 12.9 | 806 | 610 | 32.1 | 653 | 467 | 39.8 | 653 | 462 | 41.3 |
| Oil & Gas | 10,127 | 7,424 | 36.4 | 3,296 | 2,596 | 27.0 | 2,880 | 2,222 | 29.6 | 2,880 | 2,222 | 29.6 |
| Other | 4,889 | 4,909 | (0.4) | (454) | (359) | (26.5) | (399) | (411) | 2.9 | (573) | (528) | (8.5) |
| 47,998 | 43,251 | 11.0 | 8,159 | 7,691 | 6.1 | 6,330 | 5,851 | 8.2 | 6,171 | 5,706 | 8.1 |
| Research expenses | Assets | Additions to long-term assets1 |
Amortization and depreciation2 |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
|
| Chemicals | 95 | 89 | 6.7 | 6,516 | 5,687 | 14.6 | 364 | 417 | (12.7) | 397 | 360 | 10.3 |
| Plastics | 108 | 108 | – | 5,887 | 5,575 | 5.6 | 306 | 332 | (7.8) | 308 | 313 | (1.6) |
| Performance Products | 173 | 202 | (14.4) | 6,657 | 6,597 | 0.9 | 288 | 295 | (2.4) | 332 | 343 | (3.2) |
| Functional Solutions | 140 | 141 | (0.7) | 9,170 | 8,849 | 3.6 | 138 | 146 | (5.5) | 263 | 278 | (5.4) |
| Agricultural Solutions | 236 | 234 | 0.9 | 4,178 | 4,199 | (0.5) | 70 | 55 | 27.3 | 153 | 148 | 3.4 |
| Oil & Gas | 8 | 2 | 300.0 | 7,218 | 4,818 | 49.8 | 398 | 308 | 29.2 | 416 | 374 | 11.2 |
| Other | 241 | 252 | (4.4) | 9,895 | 9,578 | 3.3 | 51 | 141 | (63.8) | 119 | 169 | (29.6) |
| 1,001 | 1,028 | (2.6) | 49,521 | 45,303 | 9.3 | 1,615 | 1,694 | (4.7) | 1,988 | 1,985 | 0.2 |
1 Investment in property, plant and equipment and intangible assets
2 Depreciation and amortization of property, plant and equipment and intangible assets
| 3rd Quarter | January – September | ||||||
|---|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
||
| Sales | 1,725 | 1,657 | 4.1 | 4,889 | 4,909 | (0.4) | |
| Thereof Styrenics | 858 | 863 | (0.6) | 2,496 | 2,684 | (7.0) | |
| EBIT before special items | (277) | (24) | (399) | (411) | 2.9 | ||
| Thereof Group corporate costs | (62) | (67) | 7.5 | (179) | (172) | (4.1) | |
| Corporate research | (69) | (77) | 10.4 | (236) | (245) | 3.7 | |
| Currency conversion | (69) | 22 | (67) | 8 | |||
| Special items | (50) | (37) | (35.1) | (174) | (117) | (48.7) | |
| EBIT | (327) | (61) | (573) | (528) | (8.5) | ||
| Assets | 9,895 | 9,578 | 3.3 | – | – | – | |
| Thereof Assets of businesses included under Other | 3,180 | 3,214 | (1.1) | – | – | – | |
| Financial assets | 2,866 | 2,053 | 39.6 | – | – | – | |
| Miscellaneous receivables/other assets | 2,860 | 2,796 | 2.3 | – | – | – | |
| Cash and cash equivalents, marketable securities | 989 | 1,515 | (34.7) | – | – | – |
1 More information about Other can be found in note 3 from page 20 onward.
The Consolidated Financial Statements of the BASF Group for the year ending December 31, 2007 were prepared according to the International Financial Reporting Standards (IFRS) valid as of the balance sheet date. The current interim financial statements, as of September 30, 2008, were prepared using the same accounting policies.
The BASF Report 2007 with the Consolidated Financial Statements of the BASF Group as of December 31, 2007 can be found on the Internet at: corporate.basf.com/report
The interim financial statements have not been audited.
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 number of fully and proportionally consolidated companies has developed as follows:
| 2008 | 2007 | |
|---|---|---|
| As of January 1 | 297 | 328 |
| Thereof proportionally consolidated | 18 | 19 |
| First-time consolidations | 13 | 15 |
| Thereof proportionally consolidated | 1 | – |
| Deconsolidations | 19 | 36 |
| Thereof proportionally consolidated | – | – |
| As of September 30 | 291 | 307 |
| Thereof proportionally consolidated | 19 | 19 |
There have been 13 first-time consolidations since the beginning of 2008 due to the increasing importance of these companies.
Since the beginning of 2008, 19 companies have been deconsolidated either as a result of merger with other BASF companies or decreased significance.
As of January 1, 2008 we have newly structured our segments on the basis of similar products, production methods and customer industries. By so doing, we are allowing for the changes in our portfolio as a result of acquisitions, divestitures and restructuring measures over the past few years. The previous year's figures have been adjusted accordingly.
BASF's worldwide business is driven by operating divisions that are aggregated into six segments for reporting purposes.
The Chemicals segment consists of the Inorganics, Petrochemicals and Intermediates divisions. The Catalysts division has been transferred to the new Functional Solutions segment.
The Plastics segment is composed of the Performance Polymers and Polyurethanes divisions. The Specialty Plastics and Foams business units are reported on in the Performance Polymers division. Activities with styrene monomer (SM), polystyrene (PS), styrene-butadiene-copolymer (SBS) and acrylonitrile butadiene styrene (ABS) are reported as a disposal group under Other.
The Performance Products segment comprises the Acrylics & Dispersions, Care Chemicals and Performance Chemicals divisions. The Functional Polymers division has been renamed Acrylics & Dispersions. In the new Care Chemicals division, the activities of the former Fine Chemicals division as well as the detergents and formulators business from the Performance Chemicals division have been merged.
In the Functional Solutions segment, which consists of the Catalysts, Construction Chemicals and Coatings divisions, we are bundling the majority of our systems solutions and products for the automotive and construction industries.
The Agricultural Products and Nutrition segment has been renamed Agricultural Solutions and its Agricultural Products division has been renamed Crop Protection.
The Oil & Gas segment 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, the styrenics business that is reported as a disposal group as well as fertilizer activities. In addition, the sale of feedstock, engineering and other services, rental income and leases are reported under Other.
As of January 1, 2008, Group corporate costs are no longer allocated to the segments but reported under Other. Group corporate costs consist of the expenses for steering the BASF Group. The previous year's figures for the segments as well as of Other have been adjusted accordingly.
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.
Negative 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. In the period from January to September 2008, earnings were negatively impacted by hedging against increasing naphtha prices. The reversal of provisions for the BASF option program gave rise to income. Earnings in fertilizers were clearly increased, while earnings in styrenics were stable.
Transfers between the segments are generally 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.
| 3rd Quarter | January – September | |||
|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | |
| Income from operations | 870 | 662 | 2,880 | 2,222 |
| Income from participations | 13 | 4 | 23 | 26 |
| Other income | (14) | (7) | (39) | 9 |
| Income before taxes and minority interests | 869 | 659 | 2,864 | 2,257 |
| Income tax | 678 | 489 | 2,108 | 1,541 |
| thereof income taxes on oil-producing operations non-compensable with German corporate income tax | 531 | 329 | 1,566 | 918 |
| Income before minority interests | 191 | 170 | 756 | 716 |
| Minority interests | 22 | 14 | 144 | 95 |
| Net income | 169 | 156 | 612 | 621 |
In the reconciliation reporting for Oil & Gas, the income from operations of the Oil & Gas segment is reconciled to the contribution of the companies of this segment to the net income of the BASF Group.
Other income includes all expenses and revenues not included in income from operations of the segment, in particular the interest result and the miscellaneous financial result.
In the first nine months of 2008, minority interests increased compared with the same period in 2007. This resulted from Gazprom taking a stake in 2007 in a German Wintershall subsidiary that holds exploration and production rights to the onshore concessions 96 and 97 in Libya.
| 3rd Quarter | January – September | |||
|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | |
| Income from companies accounted for using the equity method | 21 | 1 | 32 | 43 |
| Other income from participations | 15 | 18 | 55 | 47 |
| Income from participations | 36 | 19 | 87 | 90 |
| Interest expenses | 140 | 152 | 433 | 455 |
| Interest income | 39 | 31 | 122 | 97 |
| Interest result | (101) | (121) | (311) | (358) |
| Income from write-ups/write downs and from the disposal of securities and loans | (2) | 1 | (7) | 1 |
| Net financing income/(expense) from defined benefit plans and other long-term personnel provisions |
2 | 8 | 6 | 25 |
| Interest accrued on other interst-bearing assets and liabilities | (9) | (8) | (26) | (27) |
| Construction interest | 10 | 10 | 32 | 34 |
| Other financial expenses and income | 25 | (14) | 20 | (29) |
| Other financial result | 26 | (3) | 25 | 4 |
| Financial result | (39) | (105) | (199) | (264) |
In the first nine months of 2008, the interest result improved compared with the same period of 2007 in particular due to interest income from loans granted for the financing of the production company for the Yuzhno Russkoye natural gas field. This company is accounted for using the equity method. In addition, the lower interest rates in the USA led to a decrease in interest expenses.
Other financial expenses and income were higher than in the third quarter of 2007 due to income resulting from the fair value measurement of derivative financial instruments.
| 3rd Quarter | January – September | |||
|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | |
| Germany | 230 | 284 | 1,403 | 1,398 |
| Foreign oil production branches of German companies | 685 | 490 | 2,021 | 1,344 |
| Other foreign | 555 | 810 | 2,548 | 2,700 |
| 1,470 | 1,584 | 5,972 | 5,442 |
| 3rd Quarter | January – September | |||
|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | |
| Germany | (21) | (189) | 212 | 294 |
| Foreign oil production branches of German companies | 634 | 452 | 1,866 | 1,242 |
| Thereof noncompensable | 531 | 329 | 1,566 | 918 |
| Other foreign | 57 | 62 | 441 | 435 |
| 670 | 325 | 2,519 | 1,971 | |
| Tax rate (%) | 45.6 | 20.5 | 42.2 | 36.2 |
Foreign income taxes for oil production increased significantly as a result of higher oil prices. The proportion of the foreign taxes for oil production that are non-compensable with German corporate income tax rose as a result of the reduction in the corporate income tax rate to 15% as part of the German Corporate Tax Reform 2008. The foreign taxes for oil production that are non-compensable with German corporate tax for the third quarter of 2007 of €329 million (first to third quarter of 2007: €918 million) are based on the hitherto existing corporate tax rate of 25%. The comparable value for the third quarter of 2007, calculated with a corporate tax rate of 15% according to the German Corporate Tax Reform 2008, would have amounted to €380 million (first to third quarter of 2007: €1,056 million).
A non-recurring, non-cash income of €186 million resulted from the German Corporate Tax Reform in the third quarter of 2007. This was due to the assessment of the excess deferred tax liabilities in Germany at the lower tax rate.
| 3rd Quarter | January – September | |||
|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | |
| Minority interests in profits | 41 | 50 | 232 | 211 |
| Minority interests in losses | 1 | (4) | (4) | (12) |
| 42 | 46 | 228 | 199 |
Minority interests in profits resulted primarily from Gazprom's stake in natural gas trading companies and the German Wintershall subsidiary that holds exploration and production rights to onshore concessions in Libya.
| 3rd Quarter | January – September | |||
|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | |
| Net income Million € |
758 | 1,213 | 3,225 | 3,272 |
| Number of outstanding shares (weighted average) 1,000 |
923,596 | 971,217 | 933,978 | 983,607 |
| Earnings per share € |
0.82 | 1.25 | 3.45 | 3.33 |
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 nine months of 2008 and in the corresponding period of 2007, there was no dilutive effect; undiluted earnings per share were the same as the diluted value per share.
The calculation for earnings per share took into account the two-for-one stock split that was carried out in the second quarter of 2008 retroactively for all periods shown.
Developments (million €)
| January – September 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 | 85 | 1,597 | 421 | |
| Disposals | 98 | 745 | 347 | |
| Exchange differences | 44 | 291 | 9 | |
| Balance as of September 30 | 11,548 | 46,900 | 3,184 | |
| Amortization and depreciation | ||||
| Balance as of January 1 | 1,958 | 31,542 | 315 | |
| Additions | 438 | 1,569 | 8 | |
| Disposals | 97 | 689 | 6 | |
| Exchange differences | 22 | 149 | 1 | |
| Balance as of September 30 | 2,321 | 32,571 | 318 | |
| Net book value as of September 30 | 9,227 | 14,329 | 2,866 |
| January – September 2007 | ||||
|---|---|---|---|---|
| Intangible assets | Property, plant and equipment |
Investments accounted for using the equity method and other financial assets |
||
| Acquisition costs | ||||
| Balance as of January 1 | 10,624 | 46,631 | 2,127 | |
| Additions | 92 | 1,668 | 291 | |
| Disposals | 202 | 603 | 54 | |
| Exchange differences | (333) | (773) | (33) | |
| Balance as of September 30 | 10,181 | 46,923 | 2,331 | |
| Amortization and depreciation | ||||
| Balance as of January 1 | 1,702 | 31,729 | 286 | |
| Additions | 409 | 1,583 | 1 | |
| Disposals | 171 | 533 | 9 | |
| Exchange differences | (37) | (427) | – | |
| Balance as of September 30 | 1,903 | 32,352 | 278 | |
| Net book value as of September 30 | 8,278 | 14,571 | 2,053 |
Additions to property, plant and equipment from January to September 2008 arose from a number of investments. Among the most significant are the expansion of plants to scrub synthesis gases in Ludwigshafen; the construction of the HPPO plant as well as the acrylic acid and superabsorbents plant in Antwerp, Belgium; the construction of natural gas pipelines; the construction of a new resins plant in Wyandotte, Michigan; and the expansion of the polyol plant in Geismar, Louisiana.
Additions to investments accounted for using the equity method and to other financial assets were primarily due to the market valuation of other financial assets, the effects of which are recognized directly in equity. This applies in particular to BASF's investment in K+S Aktiengesellschaft. The disposals in other financial assets primarily resulted from the repayment of a loan by OAO Severneftegazprom, which is accounted for using the equity method.
| Inventories (million €) | ||
|---|---|---|
| Sept. 30, 2008 |
Dec. 31, 2007 |
|
| Raw materials and factory supplies | 2,044 | 1,800 |
| Work-in-process, finished goods and merchandise |
5,575 | 4,708 |
| Advance payments and services-in-process | 97 | 70 |
| 7,716 | 6,578 |
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 | Capital | ||
|---|---|---|---|
| Shares | capital | reserve | |
| Outstanding shares as of December 31, 2007 | 490,485,000 | 1,256 | 3,173 |
| Shares cancelled by June 27, 2008 | 17,470,000 | (45) | 45 |
| New shares issued as part of stock split | 473,015,000 | – | – |
| Outstanding shares as of June 30, 2008 | 946,030,000 | 1,211 | 3,218 |
| Shares cancelled up to September 30, 2008 | 22,901,433 | (29) | 29 |
| Repurchased shares intended to be cancelled | 4,008,567 | (6) | – |
| Outstanding shares as disclosed in the financial statements | 919,120,000 | 1,176 | 3,247 |
On April 24, 2008, the Annual Meeting of BASF SE resolved a two-for-one stock split. Shareholders received an additional BASF share for each existing share at no additional cost. The adjustment of the securities deposit accounts and the stock exchange listing took place on June 27, 2008.
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.
In the first nine months of 2008, taking the stock split into account, BASF acquired 37,250,000 shares, or 4.04% of the current issued shares, at an average purchase price of €42.85 per share. BASF spent a total of €1,596 million on the share buyback program in the first three quarters of 2008.
On September 16, 2008, the Board of Executive Directors of BASF SE approved the cancellation of 22,901,433 BASF shares that were bought back after the last cancellation in February 2008. These shares were cancelled by the end of September.
As of September 30, 2008, 4,008,567 shares of BASF stock were held by BASF SE. These were acquired for the purpose of cancellation and reduced equity.
Transfers from other retained earnings increased legal reserves by €40 million in the first three quarters. The offsetting of actuarial gains and losses, as well as the asset ceiling, resulted in a decrease in retained earnings of €217 million. Purchases of shares in companies that are already controlled by BASF are treated as transactions between shareholders. The resulting difference of €46 million between the price paid to acquire the shares and the net assets gained was offset against retained earnings.
| Sept. 30, 2008 |
Dec. 31, 2007 |
|
|---|---|---|
| Legal reserves | 394 | 354 |
| Other retained earnings | 13,671 | 14,202 |
| 14,065 | 14,556 |
Derivatives are used to hedge the price risks involved in planned purchases of naphtha. Under other comprehensive income, effective value changes are recognized for hedging transactions for which cash flow hedge accounting is applied.
Assumptions used to determine the defined benefit obligation (weighted average in %)
| Germany | Foreign | ||||
|---|---|---|---|---|---|
| Sept. 30, 2008 | Dec. 31, 2007 | Sept. 30, 2008 | Dec. 31, 2007 | ||
| Discount rate | 6.00 | 5.25 | 6.32 | 5.82 | |
| Projected increase of wages and salaries | 2.75 | 2.75 | 4.50 | 4.50 | |
| Projected pension increase | 2.00 | 2.00 | 0.68 | 0.68 |
| Germany | Foreign | ||||
|---|---|---|---|---|---|
| Sept. 30, 2008 | Dec. 31, 2007 | Sept. 30, 2008 | Dec. 31, 2007 | ||
| Discount rate | 5.25 | 4.50 | 5.82 | 5.31 | |
| Projected increase of wages and salaries | 2.75 | 2.50 | 4.50 | 4.46 | |
| Projected pension increase | 2.00 | 1.75 | 0.68 | 0.56 | |
| Expected return on plan assets | 5.18 | 4.93 | 7.20 | 7.35 |
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.
In the first three quarters, developments in the capital markets resulted in a higher discount rate for the valuation of pension obligations and in lower pension plan assets.
| Sept. 30, 2008 | Sept. 30, 2007 | Dec. 31, 2007 | |
|---|---|---|---|
| Other long-term provisions | 2,831 | 3,067 | 3,015 |
| Other short-term provisions | 2,873 | 2,633 | 2,697 |
| 5,704 | 5,700 | 5,712 |
| Sept. 30, 2008 | Sept. 30, 2007 | Dec. 31, 2007 | ||||
|---|---|---|---|---|---|---|
| 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 | 3,749 | – | 3,574 | – | 3,763 | – |
| Bonds and other liabilities to the capital market | 3,844 | 6,173 | 2,570 | 6,389 | 2,483 | 6,498 |
| Liabilities to credit institutions | 998 | 1,088 | 377 | 611 | 665 | 456 |
| Financial indebtedness | 4,842 | 7,261 | 2,947 | 7,000 | 3,148 | 6,954 |
| Tax liabilities | 1,170 | – | 1,064 | – | 881 | – |
| Advances received on orders | 57 | – | 48 | – | 111 | – |
| Liabilities on bills | 18 | 28 | 43 | 5 | 11 | 5 |
| Liabilities related to social security | 133 | 17 | 130 | 28 | 148 | 17 |
| Miscellaneous liabilities | 2,313 | 700 | 1,357 | 779 | 1,571 | 717 |
| Deferred income | 170 | 178 | 214 | 177 | 135 | 162 |
| Other liabilities | 2,691 | 923 | 1,792 | 989 | 1,976 | 901 |
| Carrying amounts based on effective interest method |
|||||
|---|---|---|---|---|---|
| Nominal value |
Effective interest rate |
Sept. 30, 2008 |
Dec. 31, 2007 |
Sept. 30, 2007 |
|
| 3.5% Euro Bond 2003/2010 of BASF SE | 1,000 | 3.63 % | 997 | 997 | 997 |
| 3.375% Euro Bond 2005/2012 of BASF SE | 1,400 | 3.42 % | 1,398 | 1,397 | 1,397 |
| 4% Euro Bond 2006/2011 of BASF SE | 1,000 | 4.05 % | 999 | 999 | 998 |
| 4.5% Euro Bond 2006/2016 of BASF SE | 500 | 4.62 % | 496 | 496 | 496 |
| 3-Month EURIBOR Bond 2006/2009 of BASF SE | 500 | variable | 500 | 500 | 500 |
| 3.25% CHF Bond 2008/2011 of BASF Finance Europe N.V. | 300 | 3.39 % | 190 | – | – |
| 3.625% CHF Bond 2008/2015 of BASF Finance Europe N.V. | 200 | 3.78 % | 126 | – | – |
| 5% Euro Bond 2007/2014 of BASF Finance Europe N.V. | 1,000 | 5.09 % | 995 | 996 | 996 |
| 5% Euro Bond 2007/2014 of BASF Finance Europe N.V. | 250 | 4.83 % | 252 | 253 | – |
| Extendible Floating Rate Notes of BASF Finance Europe N.V. | variable | 426 | 917 | 952 | |
| Other bonds | 568 | 548 | 575 | ||
| USD Commercial Papers | 3,070 | 1,878 | 2,048 | ||
| Bonds and other liabilities to the capital markets | 10,017 | 8,981 | 8,959 | ||
| Liabilities to credit institutions | 2,086 | 1,121 | 988 | ||
| 12,103 | 10,102 | 9,947 |
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 €1,130 million in the first three quarters and €465 million in the same period of 2007.
Several members of the Supervisory Board and Board of Executive Directors also serve on the boards of executive directors or supervisory boards of companies with which BASF maintains business relations. These transactions are conducted at arm's length prices and business terms. Furthermore, no transactions that are subject to reporting have been entered into with the members of the Board of Executive Directors or members of the Supervisory Board or with companies or persons affiliated with them.
BASF has not issued loans to members of the Board of Executive Directors or the Supervisory Board.
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 106 to 109 in the BASF Report 2007. The BASF Report can be found on the Internet at: corporate.basf.com/report. We do not assume any obligation to update the forward-looking statements contained in this report.
Corporate Media Relations Michael Grabicki, Phone: +49 621 60-99938, Fax: +49 621 60-92693
Investor Relations Magdalena Moll, Phone: +49 621 60-48230, Fax: +49 621 60-22500
Internet www.basf.com
BASF SE, 67056 Ludwigshafen, Germany
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