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BASF SE

Earnings Release May 17, 2018

44_10-q_2018-05-17_993b2156-c5a8-41e0-9e9f-57db65b591b8.pdf

Earnings Release

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Quarterly Statement 1st Quarter 2018

BASF Group posts earnings growth in first quarter of 2018

  • Sales down 1% to €16.6 billion due to currency effects
  • EBIT before special items increased by 2% to €2.5 billion
  • Outlook for 2018 confirmed

Key Figures BASF Group 1st Quarter 2018

2018
2017
Change in %
Sales
million €
16,646
16,857
(1)
Income from operations before depreciation, amortization and special items
million €
3,439
3,507
(2)
Income from operations before depreciation and amortization (EBITDA)
million €
3,448
3,502
(2)
Amortization and depreciation1
million €
927
1,051
(12)
Income from operations (EBIT)
million €
2,521
2,451
3
Special items
million €
9
(6)
EBIT before special items
million €
2,512
2,457
2
Financial result
million €
(186)
(152)
(22)
Income before taxes and minority interests
million €
2,335
2,299
2
Net income
million €
1,679
1,709
(2)
EBIT after cost of capital
million €
1,120
987
13
Earnings per share

1.83
1.86
(2)
Adjusted earnings per share

1.93
1.97
(2)
Research and development expenses
million €
428
424
1
Personnel expenses
million €
2,616
2,641
(1)
Number of employees (March 31)
115,770
113,873
2
Assets (March 31)
million €
80,453
79,074
2
Investments including acquisitions2
million €
666
806
(17)
Equity ratio (March 31)
%
45.2
43.7
3
Net debt (March 31)
million €
10,482
14,933
(30)
Cash flows from operating activities
million €
1,231
833
48
Free cash flow
million €
604
66
1st quarter

1 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)

2 Additions to intangible assets and property, plant and equipment

Contents

Business Review

BASF Group 3
Significant Events 3
Results of Operations, Net Assets, Financial Position
3, 4, 4
Outlook 5
Chemicals 6
Performance Products 7
Functional Materials & Solutions 9
Agricultural Solutions 11
Oil & Gas 12
Other 13
Regions 14

Selected Financial Data

Statement of Income 15
Balance Sheet 16
Statement of Cash Flows 17

Business Review BASF Group 1st Quarter 2018

Significant Events

On April 26, 2018, BASF and Bayer announced that they have signed an agreement on the acquisition of additional businesses and assets by BASF, which Bayer offered to divest in the context of its planned acquisition of Monsanto. The expanded scope includes Bayer's entire vegetable seeds business, operating under the global trademark Nunhems®, as well as seed treatment products sold under the Poncho®, VOTiVO®, COPeO® and ILeVO® brands. The transaction also includes the R&D platform for hybrid wheat, the digital farming platform xarvio™ and further businesses and research projects.

On October 13, 2017, BASF had signed an agreement on the acquisition of the global glufosinate-ammonium non-selective herbicide business, the seeds businesses for key row crops in select markets and trait research and breeding capabilities for these crops along with the LibertyLink® trait and trademark.

The transactions, with combined 2017 sales of €2.2 billion and combined 2016 sales of €2.0 billion, complement BASF's crop protection business and biotechnology activities, adding new capabilities and opportunities for growth and innovation. The all-cash purchase price amounts to a total of €7.6 billion, subject to certain adjustments at closing. In 2016, the combined businesses generated EBITDA of €550 million (on a pro forma adjusted basis). The transactions remain subject to the closing of Bayer's acquisition of Monsanto, expected in the second quarter of 2018, and approval by the relevant merger control authorities.

On May 3, 2018, BASF and Solenis announced that they have signed an agreement to join forces by combining BASF's paper wet-end and water chemicals business with Solenis. Solenis is a global producer of specialty chemicals for water intensive industries. The combined business with pro forma sales of around €2.4 billion and around 5,000 employees in 2017 aims to deliver additional value for paper and water treatment customers. The goal is to create a customer-focused global solutions provider for the industry. BASF will hold a 49% share of the combined entity that will operate under the Solenis name and be headquartered in Wilmington, Delaware. 51% of the shares will be held by funds managed by Clayton, Dubilier & Rice. Pending approval by the relevant authorities, closing is anticipated for the end of 2018 at the earliest.

Results of Operations

Sales declined by €211 million compared with the first quarter of 2017 to €16,646 million. This was attributable to significantly negative currency effects in all segments. Higher sales prices, especially in the Functional Materials & Solutions and Chemicals segments, and increased volumes had a positive impact on sales. All segments except Performance Products recorded volumes growth.

Factors influencing BASF Group sales, 1st quarter 2018

Volumes 2%
Prices 5%
Portfolio 0%
Currencies (8%)
Sales (1%)

Income from operations (EBIT) before special items1 rose by €55 million to €2,512 million, mainly due to the significant improvement in contributions from the Chemicals and Oil & Gas segments. EBIT before special items declined slightly in the Performance Products segment, and decreased considerably in the Functional Materials & Solutions and Agricultural Solutions segments.

Special items in EBIT totaled €9 million in the first quarter of 2018, compared with minus €6 million in the prior-year quarter. Special income from divestitures, particularly in the Oil & Gas segment, exceeded special charges, which included restructuring measures and integration costs.

EBIT2 rose by €70 million as against the first quarter of 2017 to €2,521 million.

Compared with the prior-year quarter, income from operations before depreciation, amortization and special items (EBITDA before special items)3 decreased by €68 million to €3,439 million and EBITDA3 by €54 million to €3,448 million.

EBITDA before special items, 1st quarter (million €)

2018 2017
EBIT 2,521 2,451
– Special items 9 (6)
EBIT before special items 2,512 2,457
+ Depreciation, amortization and valuation allowances on
property, plant and equipment and intangible assets
before special items 927 1,050
EBITDA before special items 3,439 3,507

1 For an explanation of this indicator, see page 28 of the BASF Report 2017.

2 The calculation of income from operations (EBIT) is shown in the Statement of Income on page 15.

3 For an explanation of this indicator, see page 54 of the BASF Report 2017.

EBITDA, 1st quarter (million €)

2018 2017
EBIT 2,521 2,451
+ Depreciation, amortization and valuation allowances on
property, plant and equipment and intangible assets
927 1,051
EBITDA 3,448 3,502

The financial result declined by €34 million year on year to minus €186 million. This was primarily attributable to the lower other financial result from higher hedging expenses. The improvement in the interest result and net income from shareholdings had an offsetting effect.

Income before taxes and minority interests rose by €36 million to €2,335 million. The tax rate increased from 22.9% to 24.7%, mainly as a result of higher earnings contributions from companies in countries with a high tax rate such as Norway.

Net income declined by €30 million to €1,679 million.

Earnings per share were €1.83 in the first quarter of 2018, compared with €1.86 in the prior-year period. Earnings per share adjusted1 for special items and amortization of intangible assets amounted to €1.93 (first quarter of 2017: €1.97).

Adjusted earnings per share, 1st quarter (million €)

2018 2017
Income before taxes and minority interests 2,335 2,299
– Special items 9 (6)
+ Amortization and valuation allowances on intangible assets 134 141
– Amortization and valuation allowances on intangible assets contained in special items
Adjusted income before taxes and minority interests 2,460 2,446
– Adjusted income taxes 609 578
Adjusted income before minority interests 1,851 1,868
– Adjusted minority interests 79 63
Adjusted net income 1,772 1,805
Weighted average number of outstanding shares
in thousands
918,479 918,479
Adjusted earnings per share
1.93
1.97

Net Assets

Total assets rose by €1,685 million as against the end of 2017, from €78,768 million to €80,453 million. At €46,728 million, noncurrent assets were down €895 million on the figure as of December 31, 2017, largely due to currency effects, while current assets rose by €2,580 million.

This was mainly attributable to higher receivables and cash and cash equivalents, which were primarily increased with a view to payment of the purchase prices for the planned acquisitions.

Financial Position

Compared with December 31, 2017, equity increased from €34,756 million to €36,387 million. The equity ratio rose from 44.1% to 45.2%.

Noncurrent liabilities declined from €29,132 million to €27,765 million. This was largely attributable to the €765 million decrease in noncurrent financial indebtedness following the reclassification of a eurobond with a carrying amount of €750 million from noncurrent to current financial indebtedness. In addition, provisions for pensions and similar obligations

decreased by €458 million, mainly as a result of actuarial gains from higher discount rates.

Current liabilities rose from €14,880 million to €16,301 million due, among other factors, to higher current financial indebtedness, other liabilities and tax liabilities. The €524 million increase in current financial indebtedness primarily reflected the above reclassification, which was partially offset by the scheduled repayment of a eurobond with a carrying amount of €300 million.

Overall, financial indebtedness decreased by €241 million to €17,791 million. Net debt1 declined by €1,003 million as against December 31, 2017, to €10,482 million.

Net debt (million €)

Mar. 31, 2018 Dec. 31, 2017
Noncurrent financial indebtedness 14,770 15,535
+ Current financial indebtedness 3,021 2,497
Financial indebtedness 17,791 18,032
– Marketable securities 36 52
– Cash and cash equivalents 7,273 6,495
Net debt 10,482 11,485

In the first quarter of 2018, cash flows from operating activities amounted to €1,231 million, €398 million above the figure for the prior-year quarter. This was primarily attributable to the lower level of cash tied up in net working capital, largely in receivables. The main offsetting factors were lower amortization and depreciation of intangible assets and property, plant and equipment.

Cash flows from investing activities amounted to minus €634 million in the first quarter of 2018, compared with minus €1,215 million in the prior-year quarter. This was mainly due to the year-on-year decline in additions to other financing-related receivables. Furthermore, at €627 million, payments made for property, plant and equipment and intangible assets were down €140 million on the figure for the first quarter of 2017.

Cash flows from financing activities amounted to €201 million in the first quarter of 2018, compared with €831 million in the prior-year quarter. The year-on-year decrease was largely the result of lower net additions to financial and similar liabilities, with additions and repayments both down on

Outlook

  • Our expectations for the global economic environment in 2018 remain unchanged:
  • Growth in gross domestic product: 3.0%
  • Growth in industrial production: 3.2%
  • Growth in chemical production: 3.4%
  • Average euro/dollar exchange rate of \$1.20 per euro
  • Average Brent blend oil price for the year of \$65 per barrel

Overall, the statements on opportunities and risks made in the BASF Report 2017 continue to apply.

For more detailed information, see the Opportunities and Risks Report on pages 111 to 118 of the BASF Report 2017

the prior-year level. Payments of around €0.8 billion were received in the first quarter of 2018, mainly from hedging transactions and the increase in liabilities to credit institutions. In the prior-year quarter, we issued bonds with an aggregate nominal value of €1.9 billion. The above repayment of the eurobond with a carrying amount of €300 million in the current year contrasted with the repayment of bonds with a carrying amount of €767 million and the scaling back of BASF SE's commercial paper program by €420 million in the prior-year quarter.

Free cash flow rose from €66 million in the prior-year quarter to €604 million. Both the higher cash flows from operating activities and the lower payments made for property, plant and equipment and intangible assets contributed to the increase.

Free cash flow, 1st quarter (million €)

2018 2017
Cash flows from operating activities 1,231 833
– Payments made for property, plant and equipment
and intangible assets
627 767
Free cash flow 604 66

Our ratings have remained unchanged since the publication of the BASF Report 2017. Rated "A1/P-1/outlook stable" by Moody's, "A/A-1/outlook stable" by Standard & Poor's and "A/S-1/outlook stable" by Scope, BASF enjoys good credit ratings, especially compared with competitors in the chemical industry. These ratings were most recently confirmed by Moody's on December 19, 2017, by Standard & Poor's on October 18, 2017, and by Scope on March 6, 2018.

We are confirming the sales and earnings forecast2 for the BASF Group made in the BASF Report 2017:

  • Slight sales growth
  • Slight increase in EBIT before special items
  • Slight decline in EBIT
  • Significant premium on cost of capital with considerable decline in EBIT after cost of capital3
  • For more information, see the Outlook 2018 on page 122 of the BASF Report 2017

1 For an explanation of this indicator, see page 58 of the BASF Report 2017.

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

  • For earnings, "slight" means a change of 1–10%, while "considerable" is used for changes of 11% and higher. "At prior-year level" indicates no change (+/–0%).
  • 3 For an explanation of this indicator, see page 28 of the BASF Report 2017.

Chemicals

Segment data Chemicals (million €)

1st quarter
2018 2017 Change in %
Sales to third parties 4,286 4,105 4
of which Petrochemicals 1,779 1,654 8
Monomers 1,723 1,699 1
Intermediates 784 752 4
Income from operations before depreciation and amortization (EBITDA) 1,386 1,239 12
Amortization and depreciation1 260 265 (2)
Income from operations (EBIT) 1,126 974 16
Special items (8) 16
EBIT before special items 1,134 958 18
Assets (March 31) 13,141 13,468 (2)
Investments including acquisitions2 191 183 4
Research and development expenses 31 29 7

1 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)

2 Additions to intangible assets and property, plant and equipment

1st Quarter 2018

Sales in the Chemicals segment slightly exceeded the figure for the prior-year quarter. This was largely due to higher prices in the Monomers and Intermediates divisions as well as volumes growth in the Petrochemicals division. Sales were however significantly weighed down by currency effects, mainly relating to the U.S. dollar. We considerably increased income from operations (EBIT) before special items compared with the first quarter of 2017 as a result of higher margins and volumes.

Factors influencing sales, Chemicals 1st quarter 2018

Volumes 3%
Prices 8%
Portfolio 0%
Currencies (7%)
Sales 4%

Petrochemicals

The Petrochemicals division posted considerable year-on-year sales growth. This was driven by strong demand in Europe, which we were able to meet since the supply of raw materials through the North Harbor was no longer restricted, enabling higher plant capacity utilization in Ludwigshafen, Germany. Sales were dampened by negative currency effects. EBIT before special items was down considerably on the strong prior-year figure, primarily due to lower margins. Significantly lower steam cracker margins in all regions contrasted with higher margins for acrylic monomers, plasticizers and oxo alcohols, particularly in Europe.

Monomers

We recorded slight sales growth in the Monomers division compared with the first quarter of 2017. This was attributable to higher prices, especially for isocyanates and polyamides. By contrast, currency effects had a negative impact on sales. Sales volumes also declined significantly as a result of plant shutdowns. EBIT before special items rose considerably. This was mainly due to higher margins, in particular for isocyanates.

Intermediates

In the Intermediates division, sales rose slightly as against the prior-year quarter on the back of higher prices and volumes. We achieved higher prices, particularly for butanediol and derivatives as well as acids and polyalcohols. Volumes rose in Asia and Europe, while our delivery capabilities in North America were negatively impacted by weather-related plant shutdowns at the beginning of 2018, especially in the butanediol value chain. Sales were dampened by currency effects and the sale of the Evans City site in Pennsylvania in 2017. EBIT before special items rose considerably due to improved margins.

Performance Products

Segment data Performance Products (million €)

1st quarter
2018 2017 Change in %
Sales to third parties 3,991 4,260 (6)
of which Dispersions & Pigments 1,324 1,399 (5)
Care Chemicals 1,305 1,362 (4)
Nutrition & Health 424 486 (13)
Performance Chemicals 938 1,013 (7)
Income from operations before depreciation and amortization (EBITDA) 694 714 (3)
Amortization and depreciation1 212 215 (1)
Income from operations (EBIT) 482 499 (3)
Special items 12 (16)
EBIT before special items 470 515 (9)
Assets (March 31) 14,434 15,404 (6)
Investments including acquisitions2 124 213 (42)
Research and development expenses 91 93 (2)

1 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)

2 Additions to intangible assets and property, plant and equipment

1st Quarter 2018

Sales in the Performance Products segment declined considerably year on year. This was primarily attributable to negative currency effects in all divisions, mainly relating to the U.S. dollar. Sales were also reduced by lower volumes in the Nutrition & Health and Care Chemicals divisions as well as portfolio effects. We raised sales prices and, adjusted for currency effects, increased the average margin compared with the prior-year quarter. Income from operations (EBIT) before special items nevertheless declined slightly, largely as a result of negative currency effects.

Factors influencing sales, Performance Products 1st quarter 2018

Prices 2%
Portfolio (1%)
Currencies (6%)
Sales (6%)

Dispersions & Pigments

In the Dispersions & Pigments division, sales were slightly lower than in the prior-year quarter, mainly as a result of negative currency effects. The divestiture of the production site for styrene butadiene-based paper dispersions in Pischelsdorf, Austria, also reduced sales slightly. By contrast, sales were positively impacted by higher sales volumes in the dispersions, electronic materials, pigments and resins businesses. EBIT before special items was considerably below the figure for the first quarter of 2017, primarily due to currency effects.

Care Chemicals

Sales in the Care Chemicals division declined slightly as against the prior-year quarter. This was mainly attributable to significantly negative currency effects. Slightly lower sales volumes, especially for oleochemical surfactants and fatty alcohols, also reduced sales. Higher sales prices in all business areas had an offsetting effect. EBIT before special items rose slightly compared with the first quarter of 2017 as a result of lower fixed costs.

Nutrition & Health

In the Nutrition & Health division, sales were considerably below the figure for the prior-year quarter, largely due to lower volumes. Sales volumes declined, primarily because of the low availability of citral-based products. On October 31, 2017, a fire occurred during startup of the citral plant in Ludwigshafen, Germany. As a result, we had to declare Force Majeure for all citral and isoprenol-based aroma ingredients, and consequently for vitamin A, vitamin E and several carotenoid products. Sales were also weighed down by negative currency effects. By contrast, prices rose significantly, especially in the animal nutrition business. EBIT before special items declined slightly compared with the first quarter of 2017 due to the lower sales volumes.

Performance Chemicals

Sales in the Performance Chemicals division declined considerably year on year. This was primarily attributable to negative currency effects. Sales were also reduced by the transfer of BASF's leather chemicals business to the Stahl group. By contrast, prices – in particular for fuel, lubricant and plastic additives – trended slightly upward. Volumes were on a level with the prior-year quarter. EBIT before special items was down considerably on the prior-year quarter, mainly as a result of negative currency effects.

Functional Materials & Solutions

Segment data Functional Materials & Solutions (million €)

1st quarter
2018 2017 Change in %
Sales to third parties 5,139 5,198 (1)
of which Catalysts 1,736 1,689 3
Construction Chemicals 544 560 (3)
Coatings 940 999 (6)
Performance Materials 1,919 1,950 (2)
Income from operations before depreciation and amortization (EBITDA) 492 688 (28)
Amortization and depreciation1 167 167
Income from operations (EBIT) 325 521 (38)
Special items (8) (10) 20
EBIT before special items 333 531 (37)
Assets (March 31) 17,096 17,730 (4)
Investments including acquisitions2 128 163 (21)
Research and development expenses 104 99 5

1 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)

2 Additions to intangible assets and property, plant and equipment

1st Quarter 2018

Sales in the Functional Materials & Solutions segment were slightly lower than in the prior-year quarter. This was due to negative currency effects, which could not be completely offset by higher prices and slight volumes growth. Income from operations (EBIT) before special items declined considerably as a result of lower margins and higher fixed costs.

Factors influencing sales, Functional Materials & Solutions 1st quarter 2018

Sales (1%)
Currencies (8%)
Portfolio 0%
Prices 6%
Volumes 1%

Catalysts

Sales in the Catalysts division rose slightly, primarily due to significantly higher prices. Higher volumes in precious metal trading as well as in the chemical and refining catalysts and battery materials businesses contributed to the sales increase. Currency effects in particular had a negative impact on sales. In precious metal trading, sales increased to €685 million (first quarter of 2017: €627 million), mainly as a result of higher prices. EBIT before special items declined considerably due, among other factors, to negative currency effects.

Construction Chemicals

The Construction Chemicals division recorded a slight yearon-year decline in sales. This was attributable to negative currency effects. Higher volumes and portfolio effects lifted sales slightly, while prices were on a level with the prior-year quarter. We increased sales in Europe thanks in particular to higher volumes in the admixture systems business. Negative currency effects reduced sales in Asia and in the region South America, Africa, Middle East, despite volumes growth. Currency effects were also the main driver behind the sales decline in North America. EBIT before special items was down considerably on the prior-year quarter, largely as a result of higher raw materials prices.

Coatings

In the Coatings division, sales declined considerably as against the first quarter of 2017. This was due to negative currency effects, which could only be partially offset by higher volumes. We recorded slight volumes growth for automotive OEM coatings, surface treatments and automotive refinish coatings, while sales volumes of decorative paints declined slightly. EBIT before special items declined considerably compared with the prior-year quarter, primarily due to lower margins resulting from negative currency effects and higher raw materials prices.

Performance Materials

Sales in the Performance Materials division were down slightly on the first quarter of 2017, mainly due to currency effects. Declining volumes also had a dampening effect on sales, particularly in the styrene foams business as a result of plant maintenance. Our price increases were only able to partially offset the higher raw materials prices. EBIT before special items declined considerably year on year as a result of lower margins and higher fixed costs due to the maintenance mentioned above and the startup of new plants.

Agricultural Solutions

Segment data Agricultural Solutions (million €)

2018 2017 Change in %
Sales to third parties 1,728 1,855 (7)
Income from operations before depreciation and amortization (EBITDA) 481 595 (19)
Amortization and depreciation1 64 64
Income from operations (EBIT) 417 531 (21)
Special items (6) (2)
EBIT before special items 423 533 (21)
Assets (March 31) 8,869 10,012 (11)
Investments including acquisitions2 34 36 (6)
Research and development expenses 117 109 7

1 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)

2 Additions to intangible assets and property, plant and equipment

1st Quarter 2018

Sales in the Agricultural Solutions segment declined considerably compared with the first quarter of 2017. This was primarily attributable to negative currency effects in all regions. Sales were also reduced by slightly lower prices in North America in particular. By contrast, we increased sales volumes. Business development in the Northern Hemisphere was dampened by the long and cold winter.

Factors influencing sales, Agricultural Solutions 1st quarter 2018

Volumes 3%
Prices (2%)
Portfolio 0%
Currencies (8%)
Sales (7%)

In Europe, sales were down slightly on the prior-year quarter, mainly as a result of negative currency effects. These could not be completely offset by slightly higher sales volumes, particularly in eastern Europe.

Sales in North America decreased considerably, largely due to strongly negative currency effects. Slightly lower prices for herbicides in particular also contributed to the sales decline.

Sales rose considerably in Asia. Significantly higher sales volumes, especially in Japan and China, more than offset the negative currency effects.

The region South America, Africa, Middle East saw slight sales growth, driven in particular by higher volumes of soy fungicides and sugarcane insecticides in Brazil. Sales were weighed down by negative currency effects.

Income from operations before special items was considerably lower than in the first quarter of 2017. This was mainly attributable to negative currency effects and higher fixed costs in areas such as production and research.

Oil & Gas

Segment data Oil & Gas (million €)

1st quarter
2018 2017 Change in %
Sales to third parties 945 829 14
Income from operations before depreciation and amortization (EBITDA) 587 482 22
Amortization and depreciation1 195 313 (38)
Income from operations (EBIT) 392 169 132
Special items 27 (1)
EBIT before special items 365 170 115
Assets (March 31) 11,896 12,667 (6)
Investments including acquisitions2 174 180 (3)
Research and development expenses 5 9 (44)
Exploration expenses 13 10 30
Net income 165 140 18

1 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)

2 Additions to intangible assets and property, plant and equipment

1st Quarter 2018

We recorded considerable year-on-year sales growth in the Oil & Gas segment. This was mainly due to price increases, as well as higher volumes from Norway and stronger trading volumes. The price of a barrel of Brent crude oil averaged \$67 in the first quarter of 2018 (first quarter of 2017: \$54). Gas prices on the European spot markets also rose significantly compared with the prior-year quarter. This was partially offset by currency effects, primarily relating to the U.S. dollar.

Factors influencing sales, Oil & Gas 1st quarter 2018

11%
3%
0%
14%

Income from operations before special items also improved considerably. This was largely attributable to a higher earnings contribution from Norway due to lower depreciation as a result of higher reserves, as well as volumes growth. Higher oil and gas prices also contributed to the earnings increase. Net income rose considerably.

Other

Data on Other (million €)

1st quarter
2018 2017 Change in %
Sales 557 610 (9)
Income from operations before depreciation and amortization (EBITDA) (192) (216) 11
Amortization and depreciation1 29 27 7
Income from operations (EBIT) (221) (243) 9
Special items (8) 7
EBIT before special items (213) (250) 15
of which Costs for cross-divisional corporate research (80) (81) 1
Costs of corporate headquarters (53) (52) (2)
Other businesses (8) 5
Foreign currency results, hedging and other measurement effects 41 (31)
Miscellaneous income and expenses (113) (91) (24)
Assets (March 31)2 15,017 9,793 53
Investments including acquisitions3 15 31 (52)
Research and development expenses 80 85 (6)

1 Amortization of intangible assets and depreciation of property, plant and equipment (including impairments and reversals of impairments)

2 Contains assets of businesses recognized under Other as well as reconciliation to assets of the BASF Group (see also the remarks on the BASF Group's assets on page 4)

3 Additions to intangible assets and property, plant and equipment

1st Quarter 2018

Sales in Other were down considerably on the prior-year quarter due, among other things, to lower sales of technical materials and workshop and engineering services. Income from operations before special items increased considerably, primarily as a result of valuation effects from our long-term incentive program.

Regions

Regions (million €)

Sales
Location of company
Sales
Location of customer
Income from operations
Location of company
2018 2017 Change
in %
2018 2017 Change
in %
2018 2017 Change
in %
1st quarter
Europe 8,523 8,332 2 8,048 7,920 2 1,580 1,421 11
of which Germany 5,349 5,235 2 2,254 2,208 2 633 825 (23)
North America 3,963 4,371 (9) 3,833 4,230 (9) 317 513 (38)
Asia Pacific 3,356 3,317 1 3,566 3,530 1 588 496 19
South America, Africa, Middle East 804 837 (4) 1,199 1,177 2 36 21 71
16,646 16,857 (1) 16,646 16,857 (1) 2,521 2,451 3

1st Quarter 2018

Sales at companies located in Europe rose by 2% compared with the first quarter of 2017. This was primarily attributable to higher sales prices, particularly in the Chemicals, Oil & Gas and Functional Materials & Solutions segments. Higher volumes also contributed to sales growth. Sales in all segments were dampened by negative currency effects. At €1,580 million, income from operations (EBIT) exceeded the figure for the prior-year quarter by €159 million. This was due to considerable growth in both the Chemicals and Oil & Gas segments.

In North America, sales declined by 9% in euros, mainly as a result of negative currency effects in all segments. In local currency terms, sales were up 5% year on year. Sales were boosted by significantly higher prices. EBIT decreased by €196 million to €317 million due to lower contributions from all segments.

Sales in Asia Pacific rose by 11% in local currency terms and 1% in euros. Higher prices, especially in the Functional Materials & Solutions and Chemicals segments, and improved sales volumes in all segments more than compensated for the negative currency effects. We increased EBIT by €92 million to €588 million compared with the first quarter of 2017. This was largely attributable to the Chemicals and Performance Products segments.

In the region South America, Africa, Middle East, sales in euros were down 4% on the prior-year quarter due to negative currency effects in all segments. In local currency terms, sales rose by 13%. Higher prices and volumes growth had a positive impact on sales. At €36 million, EBIT exceeded the figure for the first quarter of 2017 by €15 million. This increase was driven by the Oil & Gas and Performance Products segments.

Selected Financial Data

Statement of Income

Statement of income (million €)

1st quarter
2018 2017 Change in %
Sales revenue 16,646 16,857 (1)
Cost of sales (11,259) (11,482) 2
Gross profit on sales 5,387 5,375 0
Selling expenses (1,988) (2,017) 1
General administrative expenses (344) (343) (0)
Research and development expenses (428) (424) (1)
Other operating income 715 307 133
Other operating expenses (909) (598) (52)
Income from companies accounted for using the equity method 88 151 (42)
Income from operations (EBIT) 2,521 2,451 3
Income from other shareholdings 12 10 20
Expenses from other shareholdings (5) (5)
Net income from shareholdings 7 5 40
Interest income 50 74 (32)
Interest expenses (118) (153) 23
Interest result (68) (79) 14
Other financial income 10 19 (47)
Other financial expenses (135) (97) (39)
Other financial result (125) (78) (60)
Financial result (186) (152) (22)
Income before taxes and minority interests 2,335 2,299 2
Income taxes (577) (527) (9)
Income before minority interests 1,758 1,772 (1)
Minority interests (79) (63) (25)
Net income 1,679 1,709 (2)
Earnings per share
Basic
1.83 1.86 (2)
Diluted
1.83 1.86 (2)

Balance Sheet

Assets (million €)

Mar. 31, 2018 Mar. 31, 2017 Change in % Dec. 31, 2017 Change in %
Intangible assets 13,316 15,091 (12) 13,594 (2)
Property, plant and equipment 24,863 26,104 (5) 25,258 (2)
Investments accounted for using the equity method 4,730 4,764 (1) 4,715 0
Other financial assets 535 618 (13) 606 (12)
Deferred tax assets 1,942 2,565 (24) 2,118 (8)
Other receivables and miscellaneous assets 1,342 1,257 7 1,332 1
Noncurrent assets 46,728 50,399 (7) 47,623 (2)
Inventories 10,357 10,218 1 10,303 1
Accounts receivable, trade 12,140 13,123 (7) 11,190 8
Other receivables and miscellaneous assets 3,919 3,457 13 3,105 26
Marketable securities 36 34 6 52 (31)
Cash and cash equivalents1 7,273 1,843 295 6,495 12
Current assets 33,725 28,675 18 31,145 8
Total assets 80,453 79,074 2 78,768 2

1 For a reconciliation of the amounts in the statement of cash flows with the balance sheet item "cash and cash equivalents," see page 17.

Equity and liabilities (million €)

Mar. 31, 2018 Mar. 31, 2017 Change in % Dec. 31, 2017 Change in %
Subscribed capital 1,176 1,176 1,176
Capital surplus 3,117 3,130 0 3,117
Retained earnings 36,514 33,227 10 34,826 5
Other comprehensive income (5,410) (3,808) (42) (5,282) (2)
Equity of shareholders of BASF SE 35,397 33,725 5 33,837 5
Minority interests 990 839 18 919 8
Equity 36,387 34,564 5 34,756 5
Provisions for pensions and similar obligations 5,835 7,590 (23) 6,293 (7)
Other provisions 3,398 3,660 (7) 3,478 (2)
Deferred tax liabilities 2,600 3,280 (21) 2,731 (5)
Financial indebtedness 14,770 14,309 3 15,535 (5)
Other liabilities 1,162 939 24 1,095 6
Noncurrent liabilities 27,765 29,778 (7) 29,132 (5)
Accounts payable, trade 4,726 4,882 (3) 4,971 (5)
Provisions 3,521 3,128 13 3,229 9
Tax liabilities 1,526 1,361 12 1,119 36
Financial indebtedness 3,021 2,501 21 2,497 21
Other liabilities 3,507 2,860 23 3,064 14
Current liabilities 16,301 14,732 11 14,880 10
Total equity and liabilities 80,453 79,074 2 78,768 2

Statement of Cash Flows

Statement of cash flows (million €)

1st quarter
2018 2017
Net income 1,679 1,709
Amortization and depreciation of intangible assets and property, plant and equipment 927 1,051
Changes in net working capital (1,345) (1,985)
Miscellaneous items (30) 58
Cash flows from operating activities 1,231 833
Payments made for property, plant and equipment and intangible assets (627) (767)
Acquisitions/divestitures 34 (22)
Financial assets and miscellaneous items (41) (426)
Cash flows from investing activities (634) (1,215)
Capital increases/repayments and other equity transactions 14
Changes in financial liabilities 220 811
Dividends (19) 6
Cash flows from financing activities 201 831
Changes in cash and cash equivalents affecting liquidity 798 449
Cash and cash equivalents at the beginning of the period and other changes 6,475 1,394
Cash and cash equivalents at the end of the period 7,273 1,843

Half-Year Financial Report 2018

July 27, 2018

Quarterly Statement 3rd Quarter 2018

October 26, 2018

BASF Report 2018

February 26, 2019

Quarterly Statement 1st Quarter 2019 / Annual Shareholders' Meeting 2019

May 3, 2019

Half-Year Financial Report 2019

July 25, 2019

Forward-looking statements and forecasts

This quarterly statement contains forward-looking statements. These statements are based on current estimates and projections of the Board of Executive Directors and currently available information. Forward-looking statements are not guarantees of the future developments and results outlined therein. These are dependent on a number of factors; they involve various risks and uncertainties; and they are based on assumptions that may not prove to be accurate. Such risk factors include those discussed in the Opportunities and Risks Report from page 111 to 118 of the BASF Report 2017. The BASF Report is available online at basf.com/report. We do not assume any obligation to update the forward-looking statements contained in this quarterly statement above and beyond the legal requirements.

Further information Contact

Published on May 4, 2018

You can find this and other publications online at basf.com/publications

General inquiries Headquarters, phone: +49 621 60-0

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

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

Internet basf.com

BASF SE, 67056 Ludwigshafen, Germany

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