Interim / Quarterly Report • Jul 31, 2008
Interim / Quarterly Report
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Milestone Q2 2008: Market success with biodegradable polymers More information on page 6
January – June 2008 Published on July 31, 2008
| 2nd Quarter | ||||||
|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
|
| Sales | 16,305 | 14,656 | 11.3 | 32,226 | 29,288 | 10.0 |
| Income from operations before depreciation and amortization (EBITDA) |
3,033 | 2,663 | 13.9 | 5,988 | 5,336 | 12.2 |
| EBITDA in percent of sales | 18.6 | 18.2 | – | 18.6 | 18.2 | – |
| Income from operations (EBIT) before special items | 2,408 | 2,030 | 18.6 | 4,762 | 4,146 | 14.9 |
| Income from operations (EBIT) | 2,359 | 2,007 | 17.5 | 4,662 | 4,017 | 16.1 |
| Financial result | (38) | (65) | 41.5 | (160) | (159) | (0.6) |
| Income before taxes and minority interets | 2,321 | 1,942 | 19.5 | 4,502 | 3,858 | 16.7 |
| Net income | 1,297 | 1,024 | 26.7 | 2,467 | 2,059 | 19.8 |
| Earnings per share (€)1 | 1.39 | 1.04 | 33.7 | 2.63 | 2.08 | 26.4 |
| Cash provided by operating activities | 1,540 | 2,042 | (24.6) | 2,629 | 2,743 | (4.2) |
| Additions to long-term assets2 | 590 | 597 | (1.2) | 1,013 | 1,036 | (2.2) |
| Excluding acquisitions | 590 | 597 | (1.2) | 1,013 | 1,036 | (2.2) |
| Amortization and depreciation2 | 674 | 656 | 2.7 | 1,326 | 1,319 | 0.5 |
| Segment assets (as of June 30)3 | 38,377 | 37,117 | 3.4 | – | – | – |
| Personnel costs | 1,621 | 1,677 | (3.3) | 3,162 | 3,272 | (3.4) |
| Number of employees (as of June 30) | 95,664 | 94,708 | 1.0 | – | – | – |
1 Values were adjusted for the two-for-one stock split. Information on the calculation of earnings per share can be found in Note 7 on page 27.
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 23 and 24.
| 01 | basf group business revie w |
14 | ove rvie w of othe r topics |
|---|---|---|---|
| 05 | BASF sha res |
15 o | utloo k |
| 06 | significant events and Economic |
16 | consolidated statements of income |
| envi | ronment | 17 | consolidated balance sheets |
| 07 | Chemicals | 18 | consolidated statements of cash flo ws |
| 08 | Plastics | 19 | consolidated statements of recognized |
| 09 | Perfo rmance Prod ucts |
income | and expenses |
| 10 | Functional Sol utions |
20 | consolidated statements of stoc kholde rs' |
| 11 | Agricult ural Sol utions |
eq | uity |
| 12 | Oil & Gas | 21 | Segment repo rting |
| 13 | Regional res ults |
23 | notes to the inte rim financial statements |
| change compa red with first-half 2007 |
sa les |
EBIT bef ore specia l items |
|---|---|---|
| firs t half |
||
| 2008 | +10% | +15% |
NEW SOLAR REFLECTING PIGMENTS FROM BASF are used, for example, as the basis for roof coatings. The pigments prevent heat absorption so energy consumption is lower in summer. They also extend the lifetime of the roof.
Innovative pigments from BASF reflect long-wave solar radiation, thus ensuring that dark surfaces stay much cooler on hot days. Depending on the application and substrate Paliogen® Black, Lumogen® Black or Sicopal® Black are used.
Unlike standard black pigments based on carbon black, the BASF pigments reflect most of the invisible near infrared radiation (NIR), which accounts for more than 50% of the total incident solar energy. Because they swallow the visible light completely like conventional black pigments, the optical impression of blackness is preserved. In this way Paliogen Black and Lumogen Black reflect up to 45% and Sicopal Black up to 30% of the total incident solar radiation energy. This value, known as "total solar reflectance," is less than 5% for carbon black.
In practical trials, the lower NIR absorption compared with other black pigments reduces surface temperatures by up to 20C. This provides benefits not only for humans. The lower temperatures also mean that there is less strain on the material. Besides being used in automotive components such as the leather seats of the new BMW convertible, roofs and building façades are the main applications for these special pigments.
They not only offer heat-reducing benefits as pigments in purely black surfaces: Paints, coatings and plastics in almost all other shades of color contain greater or lesser amounts of black pigments. If the BASF black pigments are used instead of carbon black, these colors also heat up considerably less in the sun. ///
ELECTRICITY FROM LIGHT: Organic solar cells are intended to replace the silicon solar cells that are used today in the long term. The more costeffective production of organic solar cells is an important requirement for the increased use of solar energy for power generation in the future.
Organic photovoltaics is a futuristic field of work at BASF's Joint Innovation Lab. Researchers, together with partners from universities and industry, are working on organic semiconductor materials with high thermal and photochemical stability. In the future, these materials could replace the silicon that is used in today's solar cells.
Organic solar cells are expected to be more efficient and cost effective than their silicon-based counterparts in the long run. The goal is to develop systems that convert at least 10% of the incident light into energy and offer a service life of considerably more than 10 years. The production costs for organic photovoltaics (OPV) must be below €100 per square meter in order for them to be superior to conventional silicon solar cells. The high potential for this technology with its numerous possible applications acts as a great incentive to conduct the further research necessary.
The innovative semiconductor materials make it possible to create transparent and flexible substrates. Their excellent light-absorption properties allow them to be applied in thin layers by printing or vapor deposition. Organic solar cells absorb light, irrespective of the angle of light, and can convert it into electric power even when it is cloudy. They can even produce electricity indoors, for example in hospitals or airports. They can also be used as cell phone chargers that consist only of a foldable film. With increasing efficiency, it will also be possible to use organic solar cells as chargers for laptops. Another possibility would be for a transparent film to be applied to car windows in order to generate the power necessary for the air conditioning. The main field of application will be in the construction industry, where the cells will be used in the form of a thin layer of plastic on roofs, windows or façades. ///
BASF Group's business developed successfully in the second quarter of 2008. Sales and income from operations before special items increased significantly compared with the second quarter of 2007.
Second-quarter sales in 2008 rose by 11% to €16.3 billion compared with the same period of 2007. We increased sales prices in all segments, and sales volumes grew in nearly all divisions. Currency effects, in particular the weak U.S. dollar, negatively impacted sales in euro terms. Disregarding these negative currency effects, sales rose by 19%.
| 2nd Quarter | |
|---|---|
| Volumes | 5 |
| Prices | 15 |
| Acquisitions/divestitures | (1) |
| Currencies | (8) |
| 11 |
Sales grew considerably in the Chemicals segment, above all due to price increases to reflect higher raw material costs as well as thanks to increased sales volumes. Higher sales were posted in all divisions; the most significant increase was recorded in Petrochemicals.
In the Plastics segment, sales increased compared with the second quarter of 2007. Above all, higher sales in the Polyurethanes division due to significant volume increases with slightly higher prices contributed to this.
Sales in the Performance Products segment grew slightly. Negative currency effects and divesture-related declines were more than offset by volume and price increases. Sales increased slightly in Acrylics & Dispersions and Care Chemicals and declined somewhat in Performance Chemicals.
Sales were slightly higher in the Functional Solutions segment due to higher prices. Currency effects, in particular as a result of the weak U.S. dollar, had a negative impact.
A 21% rise in sales was posted in the Agricultural Solutions segment as a result of higher volumes and prices. Sales rose considerably in all regions due to increased demand.
Sales increased considerably in the Oil & Gas segment thanks to the higher oil price and a significant rise in volumes in the Natural Gas Trading business sector.
Sales in "Other" declined due to a value-before-volume strategy in Styrenics and a decrease in raw material trade.
| Chemicals | 2008 | 2,863 | +18% |
|---|---|---|---|
| 2007 | 2,434 | ||
| Plastics | 2008 | 2,654 | +4% |
| 2007 | 2,541 | ||
| Performance | 2008 | 2,297 | +1% |
| Products | 2007 | 2,268 | |
| Functional | 2008 | 2,490 | +2% |
| Solutions | 2007 | 2,440 | |
| Agricultural | 2008 | 1,159 | +21% |
| Solutions | 2007 | 957 | |
| Oil & Gas | 2008 | 3,201 | +41% |
| 2007 | 2,269 |
Compared with the second quarter of 2007, we increased income from operations before special items by 19% to €2,408 million.
Earnings in the Chemicals segment declined significantly compared with the second quarter of 2007. This was in particular due to considerably lower margins in the cracker products business in the Petrochemicals division.
In the Plastics segment, earnings decreased above all due to weaker business in North America. Pressure on margins increased in Performance Polymers because of the significant increase in raw material costs.
Earnings in the Performance Products segment rose considerably thanks to the strong rise in earnings in Care Chemicals. We achieved higher margins, in particular for vitamins, and also reduced fixed costs.
In the Functional Solutions segment, especially in the Construction Chemicals division, earnings decreased significantly due to the decline in demand in our key customer industries automotive and construction in North America.
In the Agricultural Solutions segment, earnings grew by 51% compared with the second quarter of 2007. This was due to increased volumes and sales prices and a higher share of innovative, highly profitable products.
Earnings in the Oil & Gas segment also grew considerably. Mainly oil price-related increases led to earnings growth of approximately 50% in the Exploration & Production business sector. Earnings in the Natural Gas Trading business sector decreased as a result of the contractually delayed adjustment of sales prices to purchase prices.
"Other" includes significant earnings resulting from hedging for raw material prices. The improvement in earnings was also due to the valuation of the BASF option program at fair value, which resulted in a high level of expenses in the second quarter of 2007.
More information on "Other" can be found on page 22.
| Chemicals | 2008 | 378 | (34)% |
|---|---|---|---|
| 2007 | 573 | ||
| Plastics | 2008 | 291 | (14)% |
| 2007 | 340 | ||
| Performance | 2008 | 226 | +22% |
| Products | 2007 | 185 | |
| Functional | 2008 | 111 | (34)% |
| Solutions | 2007 | 168 | |
| Agricultural | 2008 | 363 | +51% |
| Solutions | 2007 | 241 | |
| Oil & Gas | 2008 | 1,026 | +44% |
| 2007 | 712 |
Special items in income from operations were related to expenses for restructuring that are recorded under "Other" until they are implemented in the course of the year.
Compared with the second quarter of 2007, EBIT climbed 18% to €2,359 million. Income from operations before interest, taxes, depreciation and amortization (EBITDA) increased by 14% to €3,033 million.
The financial result improved by €27 million to minus €38 million due to income from the valuation of derivatives at fair market value.
In the second quarter of 2008, income before taxes and minority interests rose by 20% to €2,321 million.
At 41%, the tax rate was four percentage points lower than in the second quarter of 2007. This was primarily due to lower tax rates in Europe, amongst other things as a result of the reduction in the nominal corporate income tax rate, as part of the German Tax Reform 2008.
Net income rose by 27% to €1,297 million.
Earnings per share were €1.39 in the second quarter compared with €1.04 in the same period of 2007.
| 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) | (16) | (153) | (298) | ||||
| Financial result | – | – | – | – | – | – | – | ||||
| (51) | (106) | (49) | (23) | (16) | (153) | (298) |
In a challenging environment, the BASF Group continued to be successful in the first half of 2008. We increased both sales and income from operations before special items significantly compared with the first half of 2007.
First-half sales in 2008 rose by 10% to €32.2 billion compared with the same period of 2007. Both sales prices and sales volumes increased in all segments compared with the first half of 2007. Currency effects, in particular the weak U.S. dollar, negatively impacted sales in euro terms in all divisions. Disregarding these negative currency effects, sales increased by 18%.
| 1st Half 2008 | |
|---|---|
| Volumes | 7 |
| Prices | 11 |
| Acquisitions/divestitures | – |
| Currencies | (8) |
| 10 |
Sales increased significantly due to higher volumes and prices in all divisions of the Chemicals segment. Compared with the first half of 2007, sales in the Petrochemicals division increased considerably mainly as a result of higher raw material prices.
The Plastics segment posted an increase in sales compared with the same period of 2007. In the Polyurethanes division, sales increased significantly due to continued high demand worldwide. In Performance Polymers, sales approximately matched the level reached in the first half of 2007.
Sales in the Performance Products segment matched the level achieved in the first half of 2007. Higher volumes and prices in all divisions offset divestiture-related declines in Care Chemicals, as well as negative currency effects.
Sales in the Functional Solutions segment increased, above all due to higher prices. In the Catalysts division especially, sales increased despite negative currency effects.
Sales in the Agricultural Solutions segment rose considerably compared with the first half of 2007. This was due to higher volumes and price increases. Thanks to high prices for agricultural produce, demand for our innovative crop-protection products increased substantially worldwide.
The strongest sales increase was again posted in the Oil & Gas segment. This was mainly due to higher crude oil prices and sales volume increases in the Natural Gas Trading business sector.
Sales decreased in "Other" in particular as a result of a value-before-volume strategy in Styrenics.
| Chemicals | 2008 | 5,424 | +15% |
|---|---|---|---|
| 2007 | 4,724 | ||
| Plastics | 2008 | 5,201 | +4% |
| 2007 | 5,007 | ||
| Performance | 2008 | 4,503 | +0% |
| Products | 2007 | 4,494 | |
| Functional | 2008 | 4,884 | +4% |
| Solutions | 2007 | 4,718 | |
| Agricultural | 2008 | 2,105 | +14% |
| Solutions | 2007 | 1,854 | |
| Oil & Gas | 2008 | 6,945 | +33% |
| 2007 | 5,239 |
Compared with the first half of 2007, income from operations before special items increased by approximately 15% to €4,762 million.
The Chemicals segment was not able to equal the excellent earnings level achieved in the first half of 2007. This was the result of a decrease in margins for cracker products due to considerably higher prices for naphtha.
Earnings in the Plastics segment almost matched the level reached in the first half of 2007. Considerably higher earnings in Polyurethanes due to the strong performance in the first quarter of 2008 almost offset the decline in the Performance Polymers division.
In the Performance Products segment, earnings increased considerably. Business developed very positively in the Care Chemicals division. We achieved higher margins, in particular for vitamins, and also reduced fixed costs.
Earnings in the Functional Solutions segment decreased in all three divisions, in particular in Construction Chemicals. This was mainly the result of lower demand from the construction and automotive industries in North America.
In the Agricultural Solutions segment, earnings increased significantly as a result of higher volumes and sales prices. Earnings increased faster than sales due to the higher proportion of innovative and highly profitable products.
The Oil & Gas segment posted a strong increase in earnings. In the Exploration & Production business sector, earnings increased above all due to higher oil prices. Earnings decreased in the Natural Gas Trading business sector. Margins in this business sector were negatively impacted by the increase in purchase prices for natural gas because higher costs on the supply side can contractually only be passed on to our customers with a time lag.
"Other" includes significant earnings resulting from hedging for raw material prices and the increased earnings from fertilizers and Styrenics. The significant improvement in earnings was also due to the valuation at fair value of the BASF option program, which was associated with high expenses in the first half of 2007.
More information on "Other" can be found on page 22.
| Chemicals | 2008 | 902 | (21)% | |
|---|---|---|---|---|
| 2007 | 1,139 | |||
| Plastics | 2008 | 650 | (1)% | |
| 2007 | 654 | |||
| Performance | 2008 | 449 | +15% | |
| Products 2007 |
389 | |||
| Functional | 2008 | 251 | (21)% | |
| Solutions | 2007 | 319 | ||
| Agricultural | 2008 | 622 | +32% | |
| Solutions | 2007 | 472 | ||
| Oil & Gas | 2008 | 2,010 | +29% | |
| 2007 | 1,560 |
Special items in income from operations were related in particular to expenses for restructuring that are recorded under "Other" until they are implemented in the course of the year.
In the first half of 2008, EBIT rose 16% to €4,662 million. EBITDA was 12% higher in the first half of 2008 at €5,988 million.
The financial result, at minus €160 million, matched the level reached in the same period of 2007.
Income before taxes and minority interests rose by approximately 17% to €4,502 million.
The tax rate was slightly lower at 41%.
Net income rose by 20% to €2,467 million compared with the first half of 2007. Earnings per share were €2.63 compared with €2.08 in the first half of 2007. ///
| 1st Half | 2nd Half | Full Year | ||||
|---|---|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |
| Income from operations | (100) | (129) | (169) | (298) | ||
| Financial result | – | – | – | – | ||
| (100) | (129) | (169) | (298) |
| 2nd Quarter 2008 | 1st Half 2008 | |
|---|---|---|
| Performance (with dividends reinvested) | ||
| BASF % |
7.2 | (9.8) |
| DAX 30 % |
(1.8) | (20.4) |
| DJ EURO STOXX 50 % |
(5.3) | (21.9) |
| DJ Chemicals % |
7.0 | 2.5 |
| MSCI World Chemicals % |
10.7 | 1.0 |
| Share prices and trading (XETRA), adjusted for two-for-one stock split | ||
| Average € |
45.91 | 45.07 |
| High € |
48.35 | 52.41 |
| Low € |
42.66 | 40.26 |
| Close (end of period) € |
43.82 | 43.82 |
| Average daily trade Million shares |
5.17 | 6.51 |
| Outstanding shares (end of period)1 Million shares |
931.89 | 931.89 |
| Market capitalization (end of period)1 Billion € |
40.83 | 40.83 |
After deduction of 14.1 million shares bought back and earmarked for cancellation
In the second quarter of 2008, the BASF share performance was 7% and thereby better than the DAX 30. The DAX 30 and DJ EURO STOXX fell by approximately 2% and 5% respectively, in a market shaken by the financial crisis and the weaker economic outlook. The DJ Chemicals and MSCI World Chemicals global industry indices grew by approximately 7% and almost 11%, respectively, over the same period.
In April 2008, the Annual Meeting of BASF SE resolved a two-for-one stock split. The adjustment of the securities deposit accounts and the stock exchange listing took place on June 27, 2008. Shareholders received an additional BASF share for each existing share at no added cost.
The proposed share split is intended to increase the attractiveness of BASF shares to a broader group of investors.
In June, BASF completed its €3 billion share buyback program for 2007 and 2008, announced in February 2007, ahead of schedule. From the beginning of 2007 until June 2008, BASF bought back shares for approximately €3 billion. Taking the stock split into account, approximately 67.5 million shares, were repurchased at an average price of €44.46. This corresponds to 7.1% of BASF SE's current share capital.
In June 2008, the Board of Executive Directors decided to start a new €3 billion share buyback program. The program began at the beginning of July and is scheduled to be completed by mid-2010.
Our Investor Relations work was awarded first place in the Capital Investor Relations Prize 2008 among EURO STOXX 50 companies. In a survey conducted by the Institutional Investor magazine, sell-side analysts also ranked BASF first for the best IR work in the European chemical industry. ///
The BASF Group announced at the beginning of July that it has set itself the goal of achieving an EBITDA margin of 18% for the next five years. This goal is based on the following long-term assumptions: an unchanged portfolio, an oil price (Brent) of \$100 per barrel and an exchange rate of \$1.40 to \$1.50 per euro. In the same period, BASF aims to post an average volume growth two percentage points above the relevant chemical market.
Gazprom export and WIEH, a joint venture between Gazprom and Wintershall, signed an agreement of intent for the extension of the existing gas supply contract to 35 years, until the end of 2043. By extending the contract, WIEH will secure more than 500 billion cubic meters of natural gas from Russia. More than 800 billion cubic meters of natural gas will be made available to the three natural gas trading companies WINGAS, WIEH, WIEE in the next 35 years.
In May, BASF started operations at a new production plant for nitric acid at its Antwerp Verbund site. The facility, which is one of the largest in the world, has a capacity of 500,000 metric tons per year. It replaces a plant that is more than 40 years old. As well as providing significantly higher yields, this is BASF's first nitric acid plant built using exclusively BASF's own technology.
BASF SE will increase its production capacities for eco-efficient polymers at its Ludwigshafen site. Ecoflex® (see cover page) production capacities will rise from the current 14,000 to 74,000 metric tons per year. Production will commence in the third quarter of 2010. At the same time, the production capacity for Ecovio®, a derivative of Ecoflex, will be increased. Ecovio is not only biodegradable, but also largely biobased. The global market for biodegradable and biobased plastics is growing at more than 20 percent per year. As the supplier of the two polymer materials Ecovio and Ecoflex, BASF is already a global market leader in the area of biobased and biodegradable plastics.
As of mid 2008, the global economy continues to be affected by the financial and property crisis, which has had a negative impact in particular in the United States and several EU countries. Surging energy and food prices are unsettling consumers, precipitating inflation worldwide and reducing purchasing power.
In the first half of 2008, the global gross domestic product grew significantly slower at 2.8% (2007: 3.5%). The U.S. economy has slowed down considerably and the economies in Europe and Japan have cooled off. At 3.9%, global industrial production growth also declined in the first half of 2008 (2007: 4.5%). Industrial activity, in particular outside of Asia, has dampened.
With this in mind, we have adjusted the underlying assumptions made for our forecast for 2008. /// The forecast for the full-year 2008 can be found on page 15.
| 2nd Quarter 1st Half |
||||||
|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
|
| Sales | 2,863 | 2,434 | 18 | 5,424 | 4,724 | 15 |
| Thereof Inorganics | 339 | 301 | 13 | 670 | 593 | 13 |
| Petrochemicals | 1,868 | 1,524 | 23 | 3,423 | 2,909 | 18 |
| Intermediates | 656 | 609 | 8 | 1,331 | 1,222 | 9 |
| Sales including intersegmental transfers | 4,257 | 3,640 | 17 | 8,193 | 7,148 | 15 |
| EBITDA | 514 | 693 | (26) | 1,165 | 1,379 | (16) |
| EBITDA in percent of sales | 18.0 | 28.5 | – | 21.5 | 29.2 | – |
| EBIT before special items | 378 | 573 | (34) | 902 | 1,139 | (21) |
| EBIT | 378 | 573 | (34) | 902 | 1,139 | (21) |
| Assets | 6,146 | 6,082 | 1 | – | – | – |
| Research expenses | 31 | 30 | 3 | 61 | 58 | 5 |
| Additions to property, plant and equipment and intangible assets | 154 | 160 | (4) | 230 | 270 | (15) |
The significant sales growth in the Chemicals segment was mainly due to the passing on of higher raw material costs as well as an increase in sales volumes (volumes 10%, prices 18%, currencies –10%). Earnings declined significantly compared with the second quarter of 2007. This was due in particular to considerably lower margins in the cracker products business.
Sales were substantially higher than in the second quarter of 2007 as a result of increased volumes and prices. In particular, we posted higher sales of inorganic specialties and inorganic basic chemicals. Earnings also increased.
At our Verbund site in Antwerp, Belgium, we started operations at a world-scale nitric acid plant with a production capacity of 500,000 metric tons.
Higher sales prices resulted in strong sales growth but were not sufficient to offset dramatically higher naphtha prices. Increased capacities in the Middle East resulted in a surplus of cracker products, particularly in Asia.
We recorded strong demand and high margins for plasticizers. However, in total, there was a significant decline in earnings.
Several scheduled maintenance shutdowns, including the shutdown of a cracker in Ludwigshafen, were completed in the second quarter of 2008.
While sales increased, earnings did not quite match the high level recorded in the second quarter of 2007. Business was negatively impacted by scheduled maintenance shutdowns, stagnant demand for PolyTHF® for spandex as well as by new market capacities for butanediol and derivatives. As in the previous quarters, sales and earnings for amines and carboxylic acid continued to develop well, driven by continuing high demand and price increases. ///
compared with Q2 2007
+18% –34%
before special items
| 2nd Quarter | ||||||
|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
|
| Sales | 2,654 | 2,541 | 4 | 5,201 | 5,007 | 4 |
| Thereof Performance Polymers | 1,259 | 1,257 | – | 2,480 | 2,499 | (1) |
| Polyurethanes | 1,395 | 1,284 | 9 | 2,721 | 2,508 | 8 |
| Sales including intersegmental transfers | 2,819 | 2,748 | 3 | 5,573 | 5,428 | 3 |
| EBITDA | 392 | 444 | (12) | 851 | 860 | (1) |
| EBITDA in percent of sales | 14.8 | 17.5 | – | 16.4 | 17.2 | – |
| EBIT before special items | 291 | 340 | (14) | 650 | 654 | (1) |
| EBIT | 291 | 339 | (14) | 649 | 652 | – |
| Assets | 5,591 | 5,639 | (1) | – | – | – |
| Research expenses | 36 | 34 | 6 | 69 | 68 | 1 |
| Additions to property, plant and equipment and intangible assets | 111 | 125 | (11) | 184 | 211 | (13) |
Sales increased in the Plastics segment compared with the same quarter of 2007 due to higher volumes and sales prices (volumes 9%, prices 3%, currencies –8%). Earnings declined, above all as a result of weaker business in North America.
In Performance Polymers, sales volume increases and slightly higher prices were absorbed by negative currency effects. Sales reached the same level as in the second quarter of 2007. Volumes rose in Asia and especially in Europe. In North America, demand declined particularly in the automotive and construction industries.
Significantly higher raw material costs increased the pressure on margins in almost all product lines. In addition, higher fixed costs due to the expansion of production plants contributed to the decrease in earnings.
BASF will build a new engineering plastics compounding plant at its production site in Thane, India. This compounding plant is expected to start operations in the second half of 2009.
Sales increased in the Polyurethanes division due to significant volume increases and slightly higher prices. In Asia we increased sales significantly and Europe also once again posted considerable gains. In North America, demand decreased noticeably particularly as a result of the slowdown in our key customer industries automotive and construction.
Earnings matched the high level recorded in the second quarter of 2007 despite scheduled plant turnarounds and negative currency effects. ///
compared with Q2 2007
sales ebit
before special items
| 2nd Quarter | 1st Half | |||||
|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
|
| Sales | 2,297 | 2,268 | 1 | 4,503 | 4,494 | – |
| Thereof Acrylics & Dispersions | 929 | 901 | 3 | 1,790 | 1,753 | 2 |
| Care Chemicals | 781 | 769 | 2 | 1,544 | 1,564 | (1) |
| Performance Chemicals | 587 | 598 | (2) | 1,169 | 1,177 | (1) |
| Sales including intersegmental transfers | 2,405 | 2,348 | 2 | 4,714 | 4,664 | 1 |
| EBITDA | 357 | 289 | 24 | 696 | 599 | 16 |
| EBITDA in percent of sales | 15.5 | 12.7 | – | 15.5 | 13.3 | – |
| EBIT before special items | 226 | 185 | 22 | 449 | 389 | 15 |
| EBIT | 249 | 180 | 38 | 480 | 374 | 28 |
| Assets | 6,317 | 6,759 | (7) | – | – | – |
| Research expenses | 57 | 69 | (17) | 113 | 136 | (17) |
| Additions to property, plant and equipment and intangible assets | 104 | 114 | (9) | 180 | 195 | (8) |
Sales in the segment were slightly higher than in the same quarter of 2007. Negative currency effects and divestiturerelated declines were more than offset by higher volumes and sales prices (volumes 5%, prices 7%, portfolio –5%, currencies –6%). Earnings increased due to the strong performance of the Care Chemicals division. Special income resulted from the sale of a manufacturing facility in Shreveport, Louisiana, and the related contract manufacturing business for pharmaceuticals.
Sales volumes increased slightly due to continued strong demand. Higher prices could not fully offset the significant increase in raw material and energy costs. Margins, in particular for acrylic monomers and paper binders, remained under pressure. Business with kaolin minerals was weak. The other businesses were flat. Overall, earnings were lower than in the second quarter of 2007.
Sales increased slightly compared with the second quarter of 2007 despite the exit from the businesses with lysine, premixes and detergent ingredient LAS (linear alkylbenzene sulfonate) as well as from the contract manufacturing business for pharmaceuticals in Shreveport, Louisiana. Increases in volumes and prices were posted in particular for vitamins as well as for detergents and formulators. A strong growth in earnings was recorded compared with the second quarter of 2007. Reduced fixed costs contributed to this increase.
Sales were slightly lower than in the second quarter of 2007 above all due to currency effects. High growth rates were posted for automotive and refinery chemicals. In North America, sales volumes across almost the entire product range were negatively impacted by the downswing in the economic environment. We countered higher raw material costs and negative currency effects with price increases and cost reduction measures. This enabled us to match the earnings level of the second quarter of 2007. ///
before special items
+1% +22%
| 2nd Quarter | 1st Half | |||||
|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
|
| Sales | 2,490 | 2,440 | 2 | 4,884 | 4,718 | 4 |
| Thereof Catalysts | 1,265 | 1,226 | 3 | 2,578 | 2,425 | 6 |
| Construction Chemicals | 563 | 558 | 1 | 1,018 | 1,016 | – |
| Coatings | 662 | 656 | 1 | 1,288 | 1,277 | 1 |
| Sales including intersegmental transfers | 2,550 | 2,473 | 3 | 4,960 | 4,796 | 3 |
| EBITDA | 193 | 244 | (21) | 420 | 474 | (11) |
| EBITDA in percent of sales | 7.8 | 10.0 | – | 8.6 | 10.0 | – |
| EBIT before special items | 111 | 168 | (34) | 251 | 319 | (21) |
| EBIT | 108 | 155 | (30) | 245 | 292 | (16) |
| Assets | 8,811 | 9,315 | (5) | – | – | – |
| Research expenses | 47 | 45 | 4 | 94 | 91 | 3 |
| Additions to property, plant and equipment and intangible assets | 36 | 42 | (14) | 82 | 79 | 4 |
The segment posted a slight increase in sales due to higher prices. Currency effects had a negative impact (volumes –2%, prices 12%, currencies –8%). Earnings decreased significantly, in particular due to the decline in demand in our key customer industries automotive and construction in North America.
In Catalysts, sales increased despite strong negative currency effects. Precious metals trading contributed €628 million (second quarter 2007: €623 million) to sales. A slight increase in earnings was posted in chemical catalysts as well as in precious metals trading. The business with emission-control technologies was negatively impacted by the decline in automotive demand in North America. Refinery catalysts recorded lower margins due to higher raw material costs. Overall, earnings did not match the level reached in the second quarter of 2007.
Sales increased slightly in Construction Chemicals as a result of higher volumes and prices. Growth was driven in
particular by North and Eastern Europe, the Middle East and Asia. In North America, sales decreased due to currency and economic effects. Earnings were significantly lower than in the second quarter of 2007 as a result of higher raw material and transport costs as well as the development of sales structures in growth markets.
BASF opened new production plants for concrete admixtures in Calcutta, India, and in Wuhan, China.
Coatings posted slightly higher sales than in the second quarter of 2007. Increases in sales of architectural coatings in Brazil and automotive coatings in Europe, Asia and South America offset lower sales of automotive coatings in North America. Earnings almost matched the level reached in the first quarter of 2007.
BASF completed the acquisition of Yasar's shares in the 50-50 joint venture Yasar BASF Automotive Coatings, which markets automotive OEM and refinish coatings in Turkey. BASF has started operations at its new production site for automotive coatings at Pavlovski Posad, Russia. ///
sales ebit
before special items
+2% –34%
| 2nd Quarter | 1st Half | ||||||
|---|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
||
| Sales | 1,159 | 957 | 21 | 2,105 | 1,854 | 14 | |
| Sales including intersegmental transfers | 1,164 | 960 | 21 | 2,116 | 1,860 | 14 | |
| EBITDA | 422 | 290 | 46 | 728 | 564 | 29 | |
| EBITDA in percent of sales | 36.4 | 30.3 | – | 34.6 | 30.4 | – | |
| EBIT before special items | 363 | 241 | 51 | 622 | 472 | 32 | |
| EBIT | 363 | 241 | 51 | 622 | 467 | 33 | |
| Assets | 4,631 | 4,725 | (2) | – | – | – | |
| Research expenses | 82 | 80 | 3 | 154 | 155 | (1) | |
| Additions to property, plant and equipment and intangible assets | 19 | 18 | 6 | 45 | 35 | 29 |
Sales increased by 21% due to increased volumes and prices; negative currency effects, in particular as a result of the weak U.S. dollar, were more than offset (volumes 24%, prices 6%, currencies –9%). Earnings rose faster than sales due to price increases and a higher share of innovative, highly profitable products.
In Europe, high demand and the increased use of crop protection products resulted in strong sales growth. Significant increases were posted in particular for cereal fungicides. Customers bought earlier due to product shortages on the market. In North America, our Plant Health fungicide Headline® grew particularly strongly. Demand for herbicides also rose in our business with crop applications. Business with non-crop applications remained under pressure due to, for example, weaker demand for products to combat termites. In Asia Pacific, we recorded strong growth, particularly in India and Japan, where our soybean herbicide Pursuit® and our rice fungicide Arashi® are highly successful. In South America, there was an early start to the season. Demand for our products for corn (maize) and soybean cultivation was already strong in the second quarter. ///
compared with Q2 2007
+21% +51%
before special items
| 2nd Quarter | 1st Half | ||||||
|---|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
||
| Sales | 3,201 | 2,269 | 41 | 6,945 | 5,239 | 33 | |
| Thereof Exploration & Production | 1,388 | 1,144 | 21 | 2,771 | 2,116 | 31 | |
| Natural Gas Trading | 1,813 | 1,125 | 61 | 4,174 | 3,123 | 34 | |
| Sales including intersegmental transfers | 3,558 | 2,547 | 40 | 7,558 | 5,803 | 30 | |
| EBITDA | 1,167 | 839 | 39 | 2,285 | 1,811 | 26 | |
| Thereof Exploration & Production | 1,086 | 749 | 45 | 1,996 | 1,375 | 45 | |
| Natural Gas Trading | 81 | 90 | (10) | 289 | 436 | (34) | |
| EBITDA in percent of sales | 36.5 | 37.0 | – | 32.9 | 34.6 | – | |
| EBIT before special items | 1,026 | 712 | 44 | 2,010 | 1,560 | 29 | |
| Thereof Exploration & Production | 980 | 656 | 49 | 1,792 | 1,192 | 50 | |
| Natural Gas Trading | 46 | 56 | (18) | 218 | 368 | (41) | |
| EBIT | 1,026 | 712 | 44 | 2,010 | 1,560 | 29 | |
| Thereof Exploration & Production | 980 | 656 | 49 | 1,792 | 1,192 | 50 | |
| Natural Gas Trading | 46 | 56 | (18) | 218 | 368 | (41) | |
| Assets | 6,881 | 4,597 | 50 | – | – | – | |
| Thereof Exploration & Production | 4,060 | 2,228 | 82 | – | – | – | |
| Natural Gas Trading | 2,821 | 2,369 | 19 | – | – | – | |
| Exploration expenses | 62 | 57 | 9 | 108 | 100 | 8 | |
| Additions to property, plant and equipment and intangible assets | 143 | 100 | 43 | 258 | 179 | 44 |
Sales rose considerably as a result of higher crude oil prices and significantly higher sales volumes in natural gas trading (volumes 4%, prices/currencies 36%, portfolio 1%). Earnings also increased.
Natural gas production increased considerably in Exploration & Production due to the additional volumes from the Yuzhno Russkoye gas field, which more than offset the decline in crude oil production. The average price of crude oil (Brent) rose by \$52 per barrel to \$121 per barrel compared with the same quarter of 2007.
As a result of the weaker U.S. dollar, the price in euros increased by approximately €27 to nearly €78 per barrel. Oil price-related increases in particular led to an increase in earnings of approximately 50%.
We increased sales volumes significantly in Natural Gas Trading above all due to new and extended natural gas supply contracts. This partly offset the negative earnings effect of the contractually delayed adjustment of sales prices to purchase prices. Earnings were lower than in the same quarter of 2007. ///
Q2 2008
sales ebit
+41% +44%
before special items
| 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 % |
|
| 2nd Quarter | |||||||||
| Europe | 9,881 | 8,568 | 15 | 9,382 | 8,003 | 17 | 1,931 | 1,520 | 27 |
| Thereof Germany | 6,873 | 5,796 | 19 | 3,405 | 2,661 | 28 | 1,437 | 1,092 | 32 |
| North America | 3,382 | 3,302 | 2 | 3,349 | 3,277 | 2 | 174 | 279 | (38) |
| Asia Pacific | 2,337 | 2,144 | 9 | 2,540 | 2,415 | 5 | 231 | 173 | 34 |
| South America, Africa, Middle East | 705 | 642 | 10 | 1,034 | 961 | 8 | 72 | 58 | 24 |
| 16,305 | 14,656 | 11 | 16,305 | 14,656 | 11 | 2,408 | 2,030 | 19 | |
| 1st Half | |||||||||
| Europe | 19,961 | 17,428 | 15 | 18,979 | 16,436 | 15 | 3,717 | 3,111 | 19 |
| Thereof Germany | 14,101 | 12,340 | 14 | 7,180 | 6,052 | 19 | 2,797 | 2,291 | 22 |
| North America | 6,284 | 6,338 | (1) | 6,226 | 6,325 | (2) | 443 | 544 | (19) |
| Asia Pacific | 4,589 | 4,255 | 8 | 4,952 | 4,652 | 6 | 454 | 380 | 19 |
| South America, Africa, Middle East | 1,392 | 1,267 | 10 | 2,069 | 1,875 | 10 | 148 | 111 | 33 |
| 32,226 | 29,288 | 10 | 32,226 | 29,288 | 10 | 4,762 | 4,146 | 15 |
Sales by location of company in Europe increased by 15% in the first half of 2008. EBIT before special items rose by €606 million to €3,717 million. The Oil & Gas segment posted higher sales and earnings mainly due to the rise in oil prices. Business in the Agricultural Solutions segment, particularly in cereal fungicides, developed well as a result of favorable market conditions. Earnings decreased in the Chemicals segment, in particular due to weaker margins for cracker products.
In the first half of 2008, sales in North America increased by 14% in dollar terms and decreased by 1% in euro terms. At €443 million, EBIT before special items was €101 million lower than in the first half of 2007. Above all, lower margins for cracker products in the Chemicals segment resulted in a decline in earnings. Business in Plastics and Functional Solutions weakened, particularly due to the slowdown in the automotive and construction industries.
In Asia Pacific, sales rose by 19% in local currency terms and by 8% in euro terms. EBIT before special items rose by €74 million to €454 million. The Plastics segment made an important contribution as a result of the strong performance of Polyurethanes. Sales in the Performance Products segment rose due to increasing demand and higher sales prices for vitamins. In the Chemicals segment, earnings declined as a result of weaker margins for cracker products.
Sales in South America, Africa, Middle East were 16% higher in local currency terms and 10% higher in euro terms. EBIT before special items increased by €37 million to €148 million. Sales and earnings for fungicides and herbicides grew considerably in the Agricultural Solutions segment, in particular due to the increased share of highly profitable products. In all divisions in the Functional Solutions segment business developed favorably, in particular in Construction Chemicals and Coatings. ///
On April 29, BASF announced the official launch of a collaborative research initiative at Harvard University. Postdoctoral researchers from the United States, France, Italy, Switzerland and China have already started working in Harvard labs. For example, they are studying the interaction between bacteria and surfaces under various conditions. Another project is researching the use of special polymers targeted to release pharmaceutical active ingredients and to increase their bioavailability. Over the next five years, funding will reach up to \$20 million.
On May 27, BASF Plant Science and Academia Sinica, the leading research institute in Taiwan, signed a cooperation agreement. The focus lies on the discovery of genes that increase yield and improve stress tolerance in major crops such as rice and corn, as well as grass species, which play a key role in ensuring food and bioenergy for the rapidly growing world population.
An exclusive agreement for a new fungicide seed treatment solution for soybeans in the United States was signed between BASF SE and Monsanto Company on June 23. The new product contains BASF's fungicide F 500®, which both fights fungal diseases and promotes plant health. The treatment is expected to be commercialized in 2009, in conjunction with the launch of Monsanto's Roundup Ready 2 Yield™ soybean seed offering.
Compared with the end of 2007, the number of BASF Group employees increased by 489 to 95,664 as of June 30, 2008. The regional distribution of BASF Group's employees as of June 30, 2008 was as follows: 64% in Europe; 16% in North America; 14% in Asia Pacific; and 6% in South America, Africa, Middle East. Compared with the same period of 2007, personnel costs in the first half of 2008 decreased by 3.4% to €3,162 million, in particular due to lower expenses for the BASF stock options program BOP and as a result of currency effects due to the depreciation of the U.S. dollar. ///
| June 30, 2008 |
Dec. 31, 2007 |
Change in % |
|
|---|---|---|---|
| Europe | 61,056 | 61,020 | – |
| North America | 15,309 | 15,191 | 1 |
| Asia Pacific | 13,298 | 13,278 | – |
| South America, Africa, Middle East |
6,001 | 5,686 | 6 |
| 95,664 | 95,175 | 1 |
As the world's leading chemical company we play a decisive role in shaping the future. Innovations are our strength in achieving this, enabling us to make use of challenges and opportunities and in so doing to continue to grow profitabily and sustainably. With our corporate research, we develop growth clusters and ensure the long-term competence of BASF with regard to technology and methods. Here, we focus on five growth clusters that cover the most important approaches for future challenges: energy management, nanotechnology, white (industrial) biotechnology, plant biotechnology, and raw material change. Starting in 2015, we expect additional annual sales of between €2 billion and €4 billion from innovations based on projects in the growth clusters.
The issues of energy efficiency and climate protection are becoming increasingly important. BASF was the first company to appoint an environmental protection officer who coordinates all climate protection activities of BASF. We were also the world's first company to present a comprehensive carbon balance for our operations. The results show that our innovative products help save approximately three times more greenhouse gas emissions than the entire amount caused by the production and disposal of all BASF products. For example, our modern insulating materials can reduce the amount of energy needed to heat residential buildings by more than 70 percent. Cars are also more climate-compatible through the use of BASF products such as plastics, fuel additives and catalysts.
Against the background of an increasingly difficult global economic environment, we will continue to focus our portfolio on profitable growth markets. Specialty products, which are faster growing than commodities, accounted for 58 percent of sales (excluding Oil & Gas, precious metals trading and "Other") in 2007, compared with 54 percent in 2003. As a result, BASF is now in a better position to deal with economic fluctuations than in the past.
The statements on risks made in the BASF Report 2007 remain valid. Based on currently available information, there are no significant individual risks at the present time or in the foreseeable future. The total sum of individual risks also does not pose a threat to the continued existence of the BASF Group.
More details are provided in the BASF Report 2007 from page 106 onward.
Our forecast for 2008 is now based on the following conditions:
Despite the challenging economic environment with high raw material costs, we are confident that we will achieve the goals we have set for 2008.
Assuming that there are no changes to BASF's portfolio, we aim to increase sales and to improve EBIT before special items slightly. ///
No significant individual risks •
| 2nd Quarter | 1st Half | |||||
|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
|
| Sales | 16,305 | 14,656 | 11.3 | 32,226 | 29,288 | 10.0 |
| Cost of sales | 11,852 | 10,519 | 12.7 | 23,411 | 20,874 | 12.2 |
| Gross profit on sales | 4,453 | 4,137 | 7.6 | 8,815 | 8,414 | 4.8 |
| Selling expenses | 1,434 | 1,385 | 3.5 | 2,792 | 2,710 | 3.0 |
| General and administrative expenses | 268 | 276 | (2.9) | 525 | 522 | 0.6 |
| Research expenses | 340 | 337 | 0.9 | 667 | 682 | (2.2) |
| Other operating income | 256 | 183 | 39.9 | 593 | 339 | 74.9 |
| Other operating expenses | 308 | 315 | (2.2) | 762 | 822 | (7.3) |
| Income from operations | 2,359 | 2,007 | 17.5 | 4,662 | 4,017 | 16.1 |
| Income from companies accounted for using the equity method | 3 | 24 | (87.5) | 11 | 42 | (73.8) |
| Other income from participations | 37 | 29 | 27.6 | 40 | 29 | 37.9 |
| Interest expense | 149 | 159 | (6.3) | 293 | 303 | (3.3) |
| Interest income | 45 | 34 | 32.4 | 83 | 66 | 25.8 |
| Other financial result | 26 | 7 | 271.4 | (1) | 7 | |
| Financial result | (38) | (65) | 41.5 | (160) | (159) | (0.6) |
| Income before taxes and minority interests | 2,321 | 1,942 | 19.5 | 4,502 | 3,858 | 16.7 |
| Income taxes | 951 | 871 | 9.2 | 1,849 | 1,646 | 12.3 |
| Income before minority interests | 1,370 | 1,071 | 27.9 | 2,653 | 2,212 | 19.9 |
| Minority interests | 73 | 47 | 55.3 | 186 | 153 | 21.6 |
| Net income | 1,297 | 1,024 | 26.7 | 2,467 | 2,059 | 19.8 |
| Earnings per share (€) 1 | ||||||
| Undiluted | 1.39 | 1.04 | 33.7 | 2.63 | 2.08 | 26.4 |
| Diluted | 1.39 | 1.04 | 33.7 | 2.63 | 2.08 | 26.4 |
1 Adjusted for two-for-one stock split; Information on the calculation of earnings per share can be found in Note 7 on page 27.
| June 30, 2008 |
June 30, 2007 |
Change in % |
Dec. 31, 2007 |
Change in % |
|
|---|---|---|---|---|---|
| Long-term assets | |||||
| Intangible assets | 8,997 | 8,597 | 4.7 | 9,559 | (5.9) |
| Property, plant and equipment | 13,831 | 14,799 | (6.5) | 14,215 | (2.7) |
| Investment accounted for using the equity method | 935 | 663 | 41.0 | 834 | 12.1 |
| Other financial assets | 2,776 | 1,358 | 104.4 | 1,952 | 42.2 |
| Deferred taxes | 587 | 563 | 4.3 | 679 | (13.5) |
| Other long-term assets | 797 | 1,615 | (50.7) | 655 | 21.7 |
| 27,923 | 27,595 | 1.2 | 27,894 | 0.1 | |
| Short-term assets | |||||
| Inventories | 6,704 | 6,530 | 2.7 | 6,578 | 1.9 |
| Accounts receivable, trade | 9,647 | 9,089 | 6.1 | 8,561 | 12.7 |
| Other receivables and miscellaneous short-term assets | 3,310 | 2,785 | 18.9 | 2,337 | 41.6 |
| Marketable securities | 42 | 80 | (47.5) | 51 | (17.6) |
| Cash and cash equivalents | 879 | 734 | 19.8 | 767 | 14.6 |
| Assets of disposal groups | 603 | – | – | 614 | (1.8) |
| 21,185 | 19,218 | 10.2 | 18,908 | 12.0 | |
| Total assets | 49,108 | 46,813 | 4.9 | 46,802 | 4.9 |
| June 30, 2008 |
June 30, 2007 |
Change in % |
Dec. 31, 2007 |
Change in % |
|
|---|---|---|---|---|---|
| Stockholders' equity | |||||
| Subscribed capital | 1,193 | 1,256 | (5.0) | 1,224 | (2.5) |
| Capital surplus | 3,218 | 3,168 | 1.6 | 3,173 | 1.4 |
| Retained earnings | 14,042 | 13,798 | 1.8 | 14,556 | (3.5) |
| Other comprehensive income | 640 | 465 | 37.6 | 174 | 267.8 |
| Minority interests | 1,074 | 593 | 81.1 | 971 | 10.6 |
| 20,167 | 19,280 | 4.6 | 20,098 | 0.3 | |
| Long-term liabilities | |||||
| Provisions for pensions and similar obligations | 1,263 | 1,252 | 0.9 | 1,292 | (2.2) |
| Other provisions | 2,847 | 3,151 | (9.6) | 3,015 | (5.6) |
| Deferred taxes | 2,041 | 1,825 | 11.8 | 2,060 | (0.9) |
| Financial indebtedness | 6,655 | 6,718 | (0.9) | 6,954 | (4.3) |
| Other long-term liabilities | 911 | 984 | (7.4) | 901 | 1.1 |
| 13,717 | 13,930 | (1.5) | 14,222 | (3.6) | |
| Short-term liabilities | |||||
| Accounts payable, trade | 3,825 | 4,258 | (10.2) | 3,763 | 1.6 |
| Provisions | 2,669 | 2,562 | 4.2 | 2,697 | (1.0) |
| Tax liabilities | 1,279 | 1,218 | 5.0 | 881 | 45.2 |
| Financial indebtedness | 5,198 | 3,282 | 58.4 | 3,148 | 65.1 |
| Other short-term liabilities | 2,235 | 2,283 | (2.1) | 1,976 | 13.1 |
| Liabilities of disposal groups | 18 | – | – | 17 | 5.9 |
| 15,224 | 13,603 | 11.9 | 12,482 | 22.0 | |
| Total stockholders' equity and liabilities | 49,108 | 46,813 | 4.9 | 46,802 | 4.9 |
| 1st Half | ||
|---|---|---|
| 2008 | 2007 | |
| Net income | 2,467 | 2,059 |
| Depreciation and amortization of long-term assets | 1,329 | 1,319 |
| Changes in net working capital | (1,186) | (663) |
| Miscellaneous items | 19 | 28 |
| Cash provided by operating activities | 2,629 | 2,743 |
| Payments related to property, plant and equipment and intangible assets | (1,049) | (1,056) |
| Acquisitions/divestitures | 35 | (17) |
| Financial investments and other items | (17) | (15) |
| Cash used in investing activities | (1,031) | (1,088) |
| Proceeds from capital increases/repayments | (1,000) | (753) |
| Changes in financial liabilities | 1,497 | 556 |
| Dividends | (1,988) | (1,568) |
| Cash used in financing activities | (1,491) | (1,765) |
| Net changes in cash and cash equivalents | 107 | (110) |
| Cash and cash equivalents as of beginning of year and other changes | 772 | 844 |
| Cash and cash equivalents at end of period | 879 | 734 |
At €2,629 million, cash provided by operating activities was €114 million lower in the first half of 2008 than in the same period of 2007. This was due to a higher level of net working capital as a result of the expansion of our business.
A total of €1,031 million was used in investing activities over the first six months of the year. This was compatible with the first half of 2007. Payments related to property, plant and equipment and intangible assets were almost the same as in the same period of 2007 and were significantly lower than amortization and depreciation.
Financing activities led to a cash outflow of €1,491 million. Dividends amounting to €1,831 million were paid out to shareholders of BASF SE, while minority shareholders in Group companies received €157 million.
We used €1,100 million to buy back shares. Taking the stock split into account, BASF bought back 24.5 million shares at an average price of €44.95 per share in the first half of 2008.
Cash and cash equivalents amounted to €879 million as of June 30, 2008, compared with €767 million at the end of 2007. In the same period, financial indebtedness rose by €1,751 million to €11,853 million. Compared with year-end 2007, net debt increased by €1,639 million to €10,974 million. ///
| 1st Half | ||
|---|---|---|
| 2008 | 2007 | |
| Net income before minority interests | 2,653 | 2,212 |
| Fair value changes in available-for-sale securities | 856 | 144 |
| Cash-flow hedges | 3 | 47 |
| Change in foreign currency translation adjustments | (384) | (32) |
| Revaluation due to acquisition achieved in stages | (1) | – |
| Actuarial gains/losses from pensions and other obligations | 1,049 | |
| Deferred taxes | (48) | (390) |
| Minority interests | (27) | (7) |
| Total income and expenses recognized directly in equity | 399 | 811 |
| Total income and expense for the period | 3,052 | 3,023 |
| Thereof BASF | 2,893 | 2,877 |
| minority interests | 159 | 146 |
| Retained earnings | Total income and expenses recog nized directly in equity |
||||||
|---|---|---|---|---|---|---|---|
| Actuarial gains/ losses |
Foreign currency translation adjustment |
Fair value changes in available-for sale securities |
Cash-flow hedges |
Revaluati on due to acquisition achieved in stages |
Total of other comprehen sive income |
||
| As of January 1, 2008 | (874) | (497) | 680 | (21) | 12 | 174 | (700) |
| Additions | – | – | 856 | 3 | – | 859 | 859 |
| Releases | – | (384) | – | – | (1) | (385) | (385) |
| Deferred taxes | (40) | 6 | (13) | (1) | – | (8) | (48) |
| As of June 30, 2008 | (914) | (875) | 1,523 | (19) | 11 | 640 | (274) |
| As of January 1, 2007 | (782) | 26 | 341 | (42) | – | 325 | (457) |
| Additions | 1,049 | – | 144 | 47 | – | 191 | 1,240 |
| Releases | – | (32) | – | – | – | (32) | (32) |
| Deferred taxes | (371) | 1 | (3) | (17) | – | (19) | (390) |
| As of June 30, 2007 | (104) | (5) | 482 | (12) | – | 465 | 361 |
| 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 |
(24,480,000) | (31) | 45 | (1,114) | – | – | (1,100) |
| Capital contribution by minority interests | – | – | – | – | – | 100 | 100 |
| Dividends paid | – | – | – | (1,831) | – | (157) | (1,988) |
| Net income | – | – | – | 2,467 | – | 186 | 2,653 |
| Income and expense recognized directly in equity |
– | – | – | (40) | 466 | (27) | 399 |
| Changes in scope of consolidation and other changes |
– | – | – | 4 | – | 1 | 5 |
| As of June 30, 2008 | 931,890,000 | 1,193 | 3,218 | 14,042 | 640 | 1,074 | 20,167 |
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 29.
| As of January 1, 2007 | Number of subscribed shares out standing1 999,360,000 |
Subscribed capital 1,279 |
Capital surplus 3,141 |
Retained earnings 13,302 |
Other com prehensive income 325 |
Minority interests 531 |
Stockholders' equity 18,578 |
|---|---|---|---|---|---|---|---|
| Share buyback and cancellation of own shares including own shares intended to be cancelled |
(18,390,000) | (23) | 27 | (753) | – | – | (749) |
| Capital contribution by minority interests | – | – | – | – | – | – | – |
| Dividends paid | – | – | – | (1,484) | – | (84) | (1,568) |
| Net income | – | – | – | 2,059 | – | 153 | 2,212 |
| Income and expense recognized directly in equity |
– | – | – | 678 | 140 | (7) | 811 |
| Changes in scope of consolidation and other changes |
– | – | – | (4) | – | – | (4) |
| As of June 30, 2007 | 980,970,000 | 1,256 | 3,168 | 13,798 | 465 | 593 | 19,280 |
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 29.
| Sales | EBITDA | Income from operations (EBIT) before special items |
Income from operations (EBIT) |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
|
| Chemicals | 2,863 | 2,434 | 17.6 | 514 | 693 | (25.8) | 378 | 573 | (34.0) | 378 | 573 | (34.0) |
| Plastics | 2,654 | 2,541 | 4.4 | 392 | 444 | (11.7) | 291 | 340 | (14.4) | 291 | 339 | (14.2) |
| Performance Products | 2,297 | 2,268 | 1.3 | 357 | 289 | 23.5 | 226 | 185 | 22.2 | 249 | 180 | 38.3 |
| Functional Solutions | 2,490 | 2,440 | 2.0 | 193 | 244 | (20.9) | 111 | 168 | (33.9) | 108 | 155 | (30.3) |
| Agricultural Solutions | 1,159 | 957 | 21.1 | 422 | 290 | 45.5 | 363 | 241 | 50.6 | 363 | 241 | 50.6 |
| Oil & Gas | 3,201 | 2,269 | 41.1 | 1,167 | 839 | 39.1 | 1,026 | 712 | 44.1 | 1,026 | 712 | 44.1 |
| Other | 1,641 | 1,747 | (6.1) | (12) | (136) | 91.2 | 13 | (189) | (56) | (193) | 71.0 | |
| 16,305 | 14,656 | 11.3 | 3,033 | 2,663 | 13.9 | 2,408 | 2,030 | 18.6 | 2,359 | 2,007 | 17.5 |
| 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 | 31 | 30 | 3.3 | 6,146 | 6,082 | 1.1 | 154 | 160 | (3.8) | 136 | 120 | 13.3 |
| Plastics | 36 | 34 | 5.9 | 5,591 | 5,639 | (0.9) | 111 | 125 | (11.2) | 101 | 105 | (3.8) |
| Performance Products | 57 | 69 | (17.4) | 6,317 | 6,759 | (6.5) | 104 | 114 | (8.8) | 108 | 109 | (0.9) |
| Functional Solutions | 47 | 45 | 4.4 | 8,811 | 9,315 | (5.4) | 36 | 42 | (14.3) | 85 | 89 | (4.5) |
| Agricultural Solutions | 82 | 80 | 2.5 | 4,631 | 4,725 | (2.0) | 19 | 18 | 5.6 | 59 | 49 | 20.4 |
| Oil & Gas | 1 | 1 | – | 6,881 | 4,597 | 49.7 | 143 | 100 | 43.0 | 141 | 127 | 11.0 |
| Other | 86 | 78 | 10.3 | 10,731 | 9,696 | 10.7 | 23 | 38 | (39.5) | 44 | 57 | (22.8) |
| 340 | 337 | 0.9 | 49,108 | 46,813 | 4.9 | 590 | 597 | (1.2) | 674 | 656 | 2.7 |
1 Investment in property, plant and equipment and intangible assets
2 Depreciation and amortization of property, plant and equipment and intangible assets
| Sales | EBITDA | Income from operations (EBIT) before special items |
Income from operations (EBIT) |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
|
| Chemicals | 5,424 | 4,724 | 14.8 | 1,165 | 1,379 | (15.5) | 902 | 1,139 | (20.8) | 902 | 1,139 | (20.8) |
| Plastics | 5,201 | 5,007 | 3.9 | 851 | 860 | (1.0) | 650 | 654 | (0.6) | 649 | 652 | (0.5) |
| Performance Products | 4,503 | 4,494 | 0.2 | 696 | 599 | 16.2 | 449 | 389 | 15.4 | 480 | 374 | 28.3 |
| Functional Solutions | 4,884 | 4,718 | 3.5 | 420 | 474 | (11.4) | 251 | 319 | (21.3) | 245 | 292 | (16.1) |
| Agricultural Solutions | 2,105 | 1,854 | 13.5 | 728 | 564 | 29.1 | 622 | 472 | 31.8 | 622 | 467 | 33.2 |
| Oil & Gas | 6,945 | 5,239 | 32.6 | 2,285 | 1,811 | 26.2 | 2,010 | 1,560 | 28.8 | 2,010 | 1,560 | 28.8 |
| Other | 3,164 | 3,252 | (2.7) | (157) | (351) | 55.3 | (122) | (387) | 68.5 | (246) | (467) | 47.3 |
| 32,226 | 29,288 | 10.0 | 5,988 | 5,336 | 12.2 | 4,762 | 4,146 | 14.9 | 4,662 | 4,017 | 16.1 |
| 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 | 61 | 58 | 5.2 | 6,146 | 6,082 | 1.1 | 230 | 270 | (14.8) | 263 | 240 | 9.6 |
| Plastics | 69 | 68 | 1.5 | 5,591 | 5,639 | (0.9) | 184 | 211 | (12.8) | 202 | 208 | (2.9) |
| Performance Products | 113 | 136 | (16.9) | 6,317 | 6,759 | (6.5) | 180 | 195 | (7.7) | 216 | 225 | (4.0) |
| Functional Solutions | 94 | 91 | 3.3 | 8,811 | 9,315 | (5.4) | 82 | 79 | 3.8 | 175 | 182 | (3.8) |
| Agricultural Solutions | 154 | 155 | (0.6) | 4,631 | 4,725 | (2.0) | 45 | 35 | 28.6 | 106 | 97 | 9.3 |
| Oil & Gas | 5 | 1 | 400.0 | 6,881 | 4,597 | 49.7 | 258 | 179 | 44.1 | 275 | 251 | 9.6 |
| Other | 171 | 173 | (1.2) | 10,731 | 9,696 | 10.7 | 34 | 67 | (49.3) | 89 | 116 | (23.3) |
| 667 | 682 | (2.2) | 49,108 | 46,813 | 4.9 | 1,013 | 1,036 | (2.2) | 1,326 | 1,319 | 0.5 |
1 Investment in property, plant and equipment and intangible assets
2 Depreciation and amortization of property, plant and equipment and intangible assets
| 2nd Quarter | 1st Half | ||||||
|---|---|---|---|---|---|---|---|
| 2008 | 2007 | Change in % |
2008 | 2007 | Change in % |
||
| Sales | 1,641 | 1,747 | (6.1) | 3,164 | 3,252 | (2.7) | |
| Thereof Styrenics | 862 | 940 | (8.3) | 1,638 | 1,821 | (10.0) | |
| EBIT before special items | 13 | (189) | (122) | (387) | 68.5 | ||
| Thereof Group corporate costs | (60) | (54) | (11.1) | (117) | (105) | (11.4) | |
| Corporate research | (85) | (76) | (11.8) | (167) | (168) | 0.6 | |
| Translation of foreign currency | (25) | (17) | (47.1) | 2 | (14) | ||
| Special items | (69) | (4) | (124) | (80) | (55) | ||
| EBIT | (56) | (193) | 71.0 | (246) | (467) | 47.3 | |
| Assets | 10,731 | 9,696 | 10.7 | 10,731 | 9,696 | 10.7 | |
| Thereof Assets of businesses included under "Other" | 2,955 | 3,590 | (17.7) | 2,955 | 3,590 | (17.7) | |
| Financial assets | 3,711 | 2,021 | 83.6 | 3,711 | 2,021 | 83.6 | |
| Miscellaneous receivables/other assets | 3,144 | 3,271 | (3.9) | 3,144 | 3,271 | (3.9) | |
| Cash and cash equivalents, marketable securities | 921 | 814 | 13.1 | 921 | 814 | 13.1 |
1 More information about "Other" can be found in Note 3 from page 23 onward.
The Consolidated Financial Statements of BASF Group for the year ended 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 June 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 | 6 | 15 |
| Thereof proportionally consolidated | 1 | – |
| Deconsolidations | 12 | 20 |
| Thereof proportionally consolidated | – | – |
| As of June 30 | 291 | 323 |
| Thereof proportionally consolidated | 19 | 19 |
There have been six first-time consolidations since the beginning of 2008 due to the increasing importance of these companies.
Since the start of 2008, 12 companies were 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.
BASF's worldwide business is driven by 13 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 have been transferred from the Styrenics division to the Performance Polymers division. Activities with styrene monomer (SM), polystyrene (PS), styrene-butadiene-copolymer (SBS) and acrylonitrile butadiene styrene (ABS) businesses are reported as 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 operating divisions Catalysts, Construction Chemicals and Coatings, we are bundling the majority of our systems solutions and products for the automotive and construction industries.
The Agricultural Products & Nutrition segment has been renamed Agricultural Solutions and its division Agricultural Products 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." The previous year's numbers for the segments as well as of "Other" have been adjusted accordingly. Group corporate costs consist of the expenses for the steering of the BASF Group.
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.
Amounts 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 cannot be allocated to the segments are recorded in "Other." In the first half of 2008, this resulted in significant income. Earnings in fertilizers and Styrenics also improved.
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.
| 2nd Quarter | 1st Half | |||
|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | |
| Income from operations | 1,026 | 712 | 2,010 | 1,560 |
| Income from participations | 8 | 19 | 10 | 22 |
| Other income | (19) | 2 | (25) | 16 |
| Income before taxes and minority interests | 1,015 | 733 | 1,995 | 1,598 |
| Income tax | 773 | 530 | 1,430 | 1,052 |
| thereof income taxes on oil-producing operations non-compensable with German corporate income tax | 577 | 331 | 1,035 | 589 |
| Income before minority interests | 242 | 203 | 565 | 546 |
| Minority interests | 40 | 11 | 122 | 81 |
| Net income | 202 | 192 | 443 | 465 |
In the reconciliation reporting Oil & Gas, the income from operations of the Oil & Gas segment is reconciled to the contribution of the companies of this segment to net income of 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 half of 2008, minority interests increased compared with the first half of 2007. This resulted from Gazprom taking a stake in a German Wintershall subsidiary that holds exploration and production rights to the onshore concessions 96 and 97 in Libya.
| 2nd Quarter | 1st Half | |||
|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | |
| Income from companies accounted for using the equity method | 3 | 24 | 11 | 42 |
| Other income from participations | 37 | 29 | 40 | 29 |
| Income from participations | 40 | 53 | 51 | 71 |
| Interest expenses | 149 | 159 | 293 | 303 |
| Interest income | 45 | 34 | 83 | 66 |
| Interest result | (104) | (125) | (210) | (237) |
| Income from write-ups/write downs and from the disposal of securities and loans | (4) | – | (5) | – |
| Net financing income/(expense) from defined benefit plans and other long-term personnel provisions |
8 | 4 | 17 | |
| Interest accrued on other interst-bearing liabilities | (9) | (10) | (17) | (19) |
| Construction interest | 11 | 13 | 22 | 24 |
| Other financial expenses and income | 28 | (4) | (5) | (15) |
| Other financial result | 26 | 7 | (1) | 7 |
| Financial result | (38) | (65) | (160) | (159) |
In the first half 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 consolidated using the equity method.
Other financial expenses and income were higher than in the second quarter of 2007 due to income resulting from the fair value valuation of derivative financial instruments. In the first quarter of 2008, similar expenses were incurred so that there was no major effect in the first half of 2008.
| 2nd Quarter | 1st Half | |||
|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | |
| Germany | 538 | 475 | 1,173 | 1,114 |
| Foreign oil production branches of German companies | 751 | 500 | 1,336 | 854 |
| Other foreign | 1,032 967 |
1,993 | 1,890 | |
| 2,321 | 1,942 | 4,502 | 3,858 |
| 2nd Quarter | 1st Half | |||
|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | |
| Germany | 67 | 192 | 233 | 483 |
| Foreign oil production branches of German companies | 688 | 459 1,232 |
790 | |
| Thereof noncompensable | 577 | 331 | 1,035 | 589 |
| Other foreign | 196 | 220 | 384 | 373 |
| 951 | 871 | 1,849 | 1,646 | |
| Tax rate (%) | 41.0 | 44.9 | 41.1 | 42.7 |
Foreign income taxes for oil production increased significantly as a result of higher oil prices. The foreign taxes for oil production that are non-compensable with German corporate income tax increased as a result of the reduction in the nominal corporate income tax 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 second quarter of 2007 of €331 million
(first-half 2007: €589 million) are based on the hitherto existing corporate tax rate of 25%. The comparable value for the second quarter of 2007, calculated with a corporate tax rate of 15% according to the German Corporate Tax Reform 2008, would have amounted to €381 million (first-half 2007: €676 million).
| 2nd Quarter | 1st Half | |||
|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | |
| Minority interests in profits | 75 | 50 | 191 | 161 |
| Minority interests in losses | (2) | (3) | (5) | (8) |
| 73 | 47 | 186 | 153 |
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.
| 2nd Quarter | 1st Half | |||
|---|---|---|---|---|
| 2008 | 2007 | 2008 | 2007 | |
| Net income Million € |
1,297 | 1,024 | 2,467 | 2,059 |
| Number of outstanding shares (weighted average) 1,000 |
935,760 | 984,903 | 939,168 | 989,802 |
| Earnings per share € |
1.39 | 1.04 | 2.63 | 2.08 |
The calculation of earnings per share is based on the weighted-average number of common shares outstanding. The calculation of diluted earnings per common share reflects all possible outstanding common shares and the resulting effect on income of the BASF incentive share program "plus."
In the first half of 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 retroactive for all periods shown.
Developments (million €)
| 1st Half 2008 | |||
|---|---|---|---|
| Intangible assets | Property, plant and equipment |
Investments accounted for using the equity method and other financial assets |
|
| Acquisition costs | |||
| Balance as of January 1 | 11,517 | 45,757 | 3,101 |
| Additions | 73 | 997 | 1,070 |
| Disposals | 67 | 312 | 103 |
| Exchange differences | (360) | (699) | (45) |
| Balance as of June 30 | 11,163 | 45,743 | 4,023 |
| Amortization and depreciation | |||
| Balance as of January 1 | 1,958 | 31,542 | 315 |
| Additions | 313 | 1,042 | 3 |
| Disposals | 65 | 273 | 6 |
| Exchange differences | (40) | (399) | – |
| Balance as of June 30 | 2,166 | 31,912 | 312 |
| Net book value as of June 30 | 8,997 | 13,831 | 3,711 |
| 1st Half 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 | 78 | 1,080 | 236 |
| Disposals | 167 | 212 | 45 |
| Exchange differences | (129) | (231) | (19) |
| Balance as of June 30 | 10,406 | 47,268 | 2,299 |
| Amortization and depreciation | |||
| Balance as of January 1 | 1,702 | 31,729 | 286 |
| Additions | 268 | 1,055 | – |
| Disposals | 149 | 184 | 8 |
| Exchange differences | (12) | (131) | – |
| Balance as of June 30 | 1,809 | 32,469 | 278 |
| Net book value as of June 30 | 8,597 | 14,799 | 2,021 |
Additions to property, plant and equipment in the first half of 2008 related to 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 an acrylic acid and superabsorbents plant in Antwerp, Belgium; the construction of the OPAL pipeline; the construction of a 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.
| Inventories (million €) | ||
|---|---|---|
| June 30, 2008 |
Dec. 31, 2007 |
|
| Raw materials and factory supplies | 1,821 | 1,800 |
| Work-in-process, finished goods and merchandise |
4,801 | 4,708 |
| Advance payments and services-in-process | 82 | 70 |
| 6,704 | 6,578 |
Work-in-process, 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.
| Outstanding shares |
Subscribed capital |
Capital reserves |
|
|---|---|---|---|
| Outstanding shares as of Dec. 30, 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 |
| Repurchased shares intended to be cancelled | (14,140,000) | (18) | – |
| Outstanding shares as disclosed in the financial statements | 931,890,000 | 1,193 | 3,218 |
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 shall be purchased on the stock exchange or through a public purchase offer open 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 validity of 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 an Annual Meeting. A sale of repurchased BASF shares requires the respective authorization through the Annual Meeting unless the shares are used with the authorization of the Supervisory Board, to acquire companies, parts of companies or holdings in companies in return for the transfer of shares.
Taking into account the stock split, BASF acquired a total of 24,480,000 shares, or 2.59% of the issued shares, at an average purchase price of €44.95 per share in the first six months of 2008. In the first half of 2008, BASF bought back shares for a total of €1,100 million.
On February 12, 2008, the Board of Executive Directors of BASF SE approved the cancellation of 17,470,000 BASF shares that were bought back after the last cancellation in July 2007 and cancelled by the end of February.
As of June 30, 2008, a total of 14,140,000 shares of BASF stock were held by BASF SE. These were acquired for the purpose of cancellation and reduced equity.
Changes in the scope of consolidation led to an increase of €3 million in the legal reserves in the first half of 2008. Transfers from other retained earnings increased legal reserves by €29 million. The offsetting of actuarial gains and losses, as well as the asset ceiling, resulted in a decrease in retained earnings of €40 million.
| June 30, 2008 |
Dec. 31, 2007 |
|
|---|---|---|
| Legal reserves | 399 | 354 |
| Other retained earnings | 13,643 | 14,202 |
| 14,042 | 14,556 |
Assumptions used to determine the defined benefit obligation (weighted average in %)
| Germany | Foreign | ||||
|---|---|---|---|---|---|
| June 30, 2008 | Dec. 31, 2007 | June 30, 2008 | Dec. 31, 2007 | ||
| Discount rate | 6.00 | 5.25 | 6.07 | 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 |
Assumptions used to determine expenses for pension benefits (from January 1 through June 30 of the respective year, weighted average in %)
| Germany | Foreign | ||||
|---|---|---|---|---|---|
| June 30, 2008 | Dec. 31, 2007 | June 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 half of 2008, developments in the capital markets resulted in a higher discount rate for the valuation of pension obligations and in lower pension plan assets.
| Other provisions (million €) | |||
|---|---|---|---|
| June 30, 2008 |
June 30, 2007 |
Dec. 31, 2007 |
|
| Other long-term provisions | 2,847 | 3,151 | 3,015 |
| Other short-term provisions | 2,669 | 2,562 | 2,697 |
| 5,516 | 5,713 | 5,712 |
Other provisions declined slightly in the first half of 2008 compared with the end of 2007. This decrease is above all due to lower personnel provisions. The increase in provisions for restructuring measures had a reverse effect.
| June 30, 2008 | June 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 | 3,825 | – | 4,258 | – | 3,763 | – |
| Bonds and other liabilities to the capital market | 4,695 | 6,170 | 2,887 | 5,984 | 2,483 | 6,498 |
| Liabilities to credit institutions | 503 | 485 | 395 | 734 | 665 | 456 |
| Financial indebtedness | 5,198 | 6,655 | 3,282 | 6,718 | 3,148 | 6,954 |
| Tax liabilities | 1,279 | – | 1,218 | – | 881 | – |
| Advances received on orders | 55 | – | 42 | – | 111 | – |
| Liabilities on bills | 20 | 26 | 60 | 11 | 11 | 5 |
| Liabilities related to social security | 131 | 17 | 132 | 27 | 148 | 17 |
| Miscellaneous liabilities | 1,857 | 697 | 1,815 | 763 | 1,571 | 717 |
| Deferred income | 172 | 171 | 234 | 183 | 135 | 162 |
| Other liabilities | 2,235 | 911 | 2,283 | 984 | 1,976 | 901 |
| Carrying amounts based on effective interest method |
|||||
|---|---|---|---|---|---|
| Nominal value |
Effective interest rate |
June 30, 2008 |
Dec. 31, 2007 |
June 30, 2007 |
|
| 3.5% Euro Bond 2003/2010 of BASF SE | 1,000 | 3.63 % | 997 | 997 | 996 |
| 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 % | 186 | – | – |
| 3.625% CHF Bond 2008/2015 of BASF Finance Europe N.V. | 200 | 3.78 % | 124 | – | – |
| 5% Euro Bond 2007/2014 of BASF Finance Europe N.V. | 1,000 | 5.09 % | 996 | 996 | – |
| 5% Euro Bond 2007/2014 of BASF Finance Europe N.V. | 250 | 4.83 % | 253 | 253 | – |
| Extendible Floating Rate Notes of BASF Finance Europe N.V. | variable | 856 | 917 | 1,000 | |
| Other bonds | 515 | 548 | 597 | ||
| USD Commercial Papers | 3,545 | 1,878 | 2,887 | ||
| Bonds and other liabilities to the capital markets | 10,865 | 8,981 | 8,871 | ||
| Liabilities to credit institutions | 988 | 1,121 | 1,129 | ||
| 11,853 | 10,102 | 10,000 |
Material supply relationships for oil and gas exist between the proportionally consolidated joint venture companies Wintershall Erdgas Handelshaus GmbH & Co. KG, Berlin, Germany; Wintershall Erdgas Handelshaus Zug AG, Zug, Switzerland; and other companies of the BASF Group. These transactions are conducted at arm's length prices and business terms. The unconsolidated portion of these supplies amounted to €798 million in the first half of 2008 and €300 million in the same period of 2007. Several members of the Supervisory Board and of the 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.
To the best of our knowledge, and in accordance with the applicable reporting principles for interim financial reporting, the interim consolidated financial statements give a true and fair view of the assets, liabilities, financial position and
Ludwigshafen, July 25, 2008
BASF SE Board of Executive Directors profit or loss of the group, and the interim management report of the group includes a fair review of the development and performance of the business and the position of the group, together with a description of the principal opportunities and risks associated with the expected development of the group for the remaining months of the financial year.
interim report third-quarter 2008
Annual meeting 2009 / Interim report first-quarter 2009
interim report first-half 2009
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 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 107 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.
Phone: +49 621 60-0, Fax: +49 621 60-42525 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 BASF SE, 67056 Ludwigshafen, Germany
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