Interim / Quarterly Report • Jul 29, 2010
Interim / Quarterly Report
Open in ViewerOpens in native device viewer
| 2nd Quarter | 1st Half | ||||||
|---|---|---|---|---|---|---|---|
| 2010 | 2009 | Change in % | 2010 | 2009 | Change in % | ||
| 16,214 | 12,502 | 29.7 | 31,668 | 24,721 | 28.1 | ||
| 2,867 | 1,576 | 81.9 | 5,494 | 3,163 | 73.7 | ||
| 2,206 | 1,140 | 93.5 | 4,160 | 2,125 | 95.8 | ||
| 2,079 | 772 | 169.3 | 3,919 | 1,700 | 130.5 | ||
| (93) | (59) | (57.6) | (173) | (261) | 33.7 | ||
| 1,986 | 713 | 178.5 | 3,746 | 1,439 | 160.3 | ||
| 1,183 | 343 | 244.9 | 2,212 | 718 | 208.1 | ||
| 1.29 | 0.37 | 248.6 | 2.41 | 0.78 | 209.0 | ||
| 1.50 | 0.79 | 90.3 | 2.82 | 1.34 | 110.7 | ||
| 17.7 | 12.6 | – | 17.3 | 12.8 | – | ||
| 1,709 | 1,563 | 9.3 | 2,721 | 3,647 | (25.4) | ||
| 494 | 4,390 | (88.7) | 874 | 4,915 | (82.2) | ||
| 494 | 737 | (33.0) | 874 | 1,262 | (30.7) | ||
| 376 | 352 | 6.8 | 726 | 677 | 7.2 | ||
| 788 | 804 | (2.0) | 1,575 | 1,463 | 7.7 | ||
| 45,549 | 41,794 | 9.0 | – | – | – | ||
| 2,166 | 1,793 | 20.8 | 4,116 | 3,335 | 23.4 | ||
| 103,284 | 106,667 | (3.2) | – | – | – | ||
1 For further information, see page 33
2 Intangible assets and property, plant and equipment (including acquisitions)
3 Intangible assets, property, plant and equipment, inventories and business-related receivables
| BASF Group Business Review | 1 |
|---|---|
| BASF on the Capital Market1 | 5 |
| Significant Events and Economic Environment | 6 |
| Chemicals | 7 |
| Plastics | 8 |
| Performance Products | 9 |
| Functional Solutions | 10 |
| Agricultural Solutions | 11 |
| Oil & Gas | 12 |
| Regional Results | 13 |
| Overview of Other Topics | 14 |
| Outlook | 15 |
| Consolidated Statements of Income | 16 |
|---|---|
| Consolidated Balance Sheets | 17 |
| Consolidated Statements of Cash Flows | 18 |
| Consolidated Statements of Recognized Income | |
| and Expense | 19 |
| Consolidated Statements of Stockholders' Equity | 20 |
| Segment Reporting | 21 |
| Notes to the Interim Financial Statements | 23 |
| Calculation of Adjusted Earnings per Share | 33 |
| Statement in Accordance with Section 37y and Section | |
| 37w (2) No. 3 of the German Securities Trading Act | 33 |
1 This section is not part of the interim management's analysis.
Change in comparison with 1st half 2009 Sales EBIT 1st Half
before special items
2010 +28% +96%
Advice for sustainable agriculture: BASF employee Jai Krishna Pandey advises Indian farmers participating in the Samruddhi business model.
Page 7
In the Chemicals segment, we supply products to customers in the chemical, electronics, construction, textile, automotive, pharmaceutical and agricultural industries as well as many others. Furthermore, we ensure that other BASF segments are supplied with chemicals for the production of higher value products. Our portfolio ranges from basic chemicals, glues and electronic chemicals for the semiconductor and solar cell industries, to solvents and plasticizers, as well as starting materials for products such as detergents, plastics, textile fibers, paints and coatings and pharmaceuticals.
The Plastics segment includes a broad range of products, system solutions and services. We offer a number of engineering plastics for the automotive and electric industries as well as for use in household appliances and sports and leisure products. Our styrenic foams are used as insulating materials in the construction industry and in packaging. Our polyurethanes are extremely versatile: as soft foams, for example, they improve car seats and mattresses, and as rigid foams they serve as highly efficient insulation in refrigerators.
Performance Products lend stability and color to countless everyday items and help to improve their application profile. Our product portfolio includes vitamins and food additives as well as ingredients for pharmaceuticals and for hygiene, home and personal care items. Other Performance Products improve processes in the paper industry, oil production, mining and water treatment. They can also enhance the efficiency of fuels and lubricants, the effectiveness of adhesives and coatings and the stability of plastics.
Page 10
In the Functional Solutions segment we bundle system solutions and innovative products for specific customers and industries, in particular for the automotive and construction sectors. Our portfolio comprises automotive and industrial catalysts, automotive and industrial coatings, as well as concrete admixtures and construction systems such as tile adhesives and architectural coatings.
Page 11
Our crop protection products guard against fungal diseases, insects and weeds and they increase quality and secure crop yields. Our research in plant biotechnology concentrates on plants for greater efficiency in agriculture, healthier nutrition and for use as renewable raw materials.
As the largest German producer of oil and gas, we focus our exploration and production on oil and gas-rich regions in Europe, North Africa, South America, Russia and the Caspian Sea region. Together with our Russian partner Gazprom, we are active in the trading, transport and storage of natural gas in Europe.
Kaurit® Light from BASF makes chipboard 30% lighter for modern interior design
The furniture industry has long been on the lookout for more lightweight boards. That is why BASF has now developed a technology for an innovative wood-based material with the potential to revolutionize the furniture market: Kaurit® Light. Wood-based panels made with the new technology weigh 30% less than conventional chipboard while offering the same strength. Kaurit Light panels consist of wood chips, a foamed polymer and Kaurit glue.
Conventional chipboard is made of three layers: The two outer layers have the smoothest possible surface and are therefore made of small wood particles. Between them is the middle layer making up two thirds of the total wood content. The larger wood chips incorporated in this layer make sure the panel can withstand loading. To produce the chipboard, the wood chips are first dried and then mixed with glue. They are then spread in three layers on top of each other on a conveyor belt and bonded together under high pressure at up to 250 degrees Celsius.
With the Kaurit Light technology, about 200 kilograms of wood per cubic meter of wood-based panel are replaced by 15 to 25 kg of polymer. The polymer is added in the form of foam beads only in the middle layer. Although the panel now incorporates much more air, it has the same strength as conventional chipboard: The foamed polymer fills the cavities between the wood chips, generates counter pressure and creates additional binding sites that enhance the panel's strength. The result is a versatile wood-based panel that is around 30% lighter per cubic meter than standard chipboard.
A further advantage of wood-based panel manufactured with Kaurit Light: Chipboard can be made on existing machinery and can be processed with the usual surfaces, edges and fittings.
The innovative wood-based material with Kaurit Light technology opens up new design and construction possibilities, for example, in the kitchen.
Foamed polymer fills the cavities between the wood chips, generates counter pressure and creates additional binding sites that enhance the panel's strength.
2nd Quarter 2010
Global economic recovery continued in the second quarter of 2010. As a result of strong demand, our business developed better than expected. Sales grew by 30% to €16.2 billion. Income from operations before special items increased by 94% to €2,206 million, thanks mainly to higher sales volumes. Nearly all divisions significantly improved earnings compared with the very weak second quarter of 2009. Compared with the first quarter of 2010, sales and earnings in the chemicals business1 increased again.
Sales volumes increased sharply compared with the same period of the previous year in almost all segments; volumes in Agricultural Solutions were at the very high level of the second quarter of 2009. Prices were higher year-on-year in nearly all divisions, particularly in the Petrochemicals and Performance Polymers divisions. In the Catalysts division, higher prices were particularly attributable to an increase in precious metals prices. The weaker euro had a positive impact on sales in all businesses.
| 2nd Quarter | |
|---|---|
| Volumes | 14 |
| Prices | 9 |
| Portfolio measures | 1 |
| Currencies | 6 |
| 30 |
Sales in Chemicals were well above those in the same quarter of the previous year. Demand for our products was high and sales volumes increased substantially. At the same time, the available supply of some products, such as those in the butanediol value-adding chain and petrochemicals, remained tight despite high capacity utilization. Earnings improved significantly thanks to increased volumes and margins. Earnings also improved compared with the first quarter of 2010 despite the scheduled maintenance shutdown at our site in Nanjing, China.
In a favorable market environment, positive sales development in the Plastics segment continued. Compared with the weak second quarter of 2009, sales in the segment climbed sharply. High capacity utilization at our plants and good margins for polyamide intermediates contributed to a significant improvement in earnings. We also surpassed the figures in the first quarter of 2010.
| Chemicals | 2010 | 2,970 | 64% |
|---|---|---|---|
| 2009 | 1,809 | ||
| Plastics | 2010 | 2,584 | 48% |
| 2009 | 1,750 | ||
| Performance | 2010 | 3,151 | 29% |
| Products | 2009 | 2,443 | |
| Functional | 2010 | 2,453 | 40% |
| Solutions | 2009 | 1,755 | |
| Agricultural | 2010 | 1,211 | 3% |
| Solutions | 2009 | 1,175 | |
| Oil & Gas | 2010 | 2,374 | (3%) |
| 2009 | 2,452 | ||
| Other | 2010 | 1,471 | 32% |
| 2009 | 1,118 |
All divisions in the Performance Products segment increased their sales markedly thanks to stronger demand. Due to the limited availability of important intermediates, there were some delivery bottlenecks. Positive currency effects and higher prices boosted sales growth in the segment. The upturn in the business environment and the realization of synergies both helped increase earnings, which were well above the level of the second quarter of 2009. Every division made a clearly positive contribution to earnings.
Increasing demand from the automotive sector, a key customer industry, as well as higher precious metals prices led to significant growth in sales for the Functional Solutions segment. The business environment in the construction industry, on the other hand, remained difficult. All divisions contributed substantially to earnings. Overall, the segment's earnings improved significantly compared with the same quarter of 2009.
In the Agricultural Solutions segment, we increased sales thanks to positive currency effects as well as higher volumes in South America and Asia. In North America, business with our recently launched innovative herbicide Kixor™ continued to develop very successfully. Earnings were lower year-on-year due to lower prices and targeted increases in selling expenses and research and development expenses.
In the Oil & Gas segment, sales fell slightly below the level of the second quarter of 2009. Sharp sales volume increases in Natural Gas Trading as a result of weather and the economic upturn helped sales to match the level of the second quarter 2009 despite declining natural gas prices. In the business sector Exploration & Production, sales in Libya declined due mainly to the OPEC production restrictions. Earnings grew slightly overall thanks to higher gas trading volumes.
Other posted significant sales growth, primarily as a result of higher prices in the Styrenics business. Styrenics improved its earnings. Provisions for the BASF option program reduced earnings because BASF shares outperformed the benchmark index MSCI World Chemicals in the second quarter of 2010.
Special items of minus €127 million primarily resulted from expenses for planned restructuring measures. In the second quarter of 2009, special items had amounted to minus €368 million due to the integration of Ciba.
Compared with the same period of the previous year, EBIT grew by €1,307 million to €2,079 million. EBITDA rose by €1,291 million to €2,867 million. The EBITDA margin increased to 17.7% (second quarter of 2009: 12.6%).
| Chemicals | 2010 | 687 | +429 | |
|---|---|---|---|---|
| 2009 | 258 | |||
| Plastics | 2010 | 349 | +211 | |
| 2009 | 138 | |||
| Performance | 2010 | 471 | +391 | |
| Products | 2009 | 80 | ||
| Functional | 2010 | 165 | +117 | |
| Solutions | 2009 | 48 | ||
| Agricultural | 2010 | 320 | (47) | |
| Solutions | 2009 | 367 | ||
| Oil & Gas | 2010 | 515 | +9 | |
| 2009 | 506 | |||
| Other | 2010 | (301) | (44) | |
| 2009 | (257) | |||
At minus €93 million, the financial result was €34 million less than in the second quarter of the previous year due to lower income from participations.
Income before taxes and minority interests increased by €1,273 million to €1,986 million. At 32.5%, the tax rate was lower than in the second quarter of 2009. This was mainly due to the lower earnings contribution from the highly-taxed Oil & Gas segment.
Net income increased by €840 million to €1,183 million. Earnings per share were €1.29 in the second quarter compared with €0.37 in the same period of 2009. Adjusted for special items and amortization of intangible assets, earnings per share amounted to €1.50 (second quarter of 2009: €0.79).
Information on the calculation of adjusted earnings per share can be found on page 33
| 2010 | 2009 | |
|---|---|---|
| 1st quarter | (114) | (57) |
| 2nd quarter | (127) | (368) |
| 1st half | (241) | (425) |
| 3rd quarter | (277) | |
| 4th quarter | (473) | |
| Full Year | (1,175) |
| 2010 | 2009 | |
|---|---|---|
| 1st quarter | 1.32 | 0.55 |
| 2nd quarter | 1.50 | 0.79 |
| 1st half | 2.82 | 1.34 |
| 3rd quarter | 0.61 | |
| 4th quarter | 1.06 | |
| Full Year | 3.01 |
1st Half 2010
Our business benefited in the first half of 2010 from the global economic recovery. Demand for chemical products was additionally driven by our customers' inventory restocking. At €31.7 billion, sales were 28% higher than the exceptionally low level of the previous year's first half. In the chemicals business1 , we significantly surpassed the sales levels of the first half of 2009 in all segments. Income from operations before special items increased sharply by 96% to €4,160 million. All divisions made a significant contribution to earnings.
Compared with the weak first half of 2009, sales volumes rose sharply in nearly all segments. In Agricultural Solutions, sales volumes were slightly higher year-on-year. Prices increased particularly strongly in the Petrochemicals, Performance Polymers and Catalysts divisions. In the Oil & Gas segment, a significant decline in natural gas prices had a negative impact on sales. Portfolio measures, in particular the acquisition of Ciba, increased BASF Group sales by 4% while positive currency effects boosted sales by 2%.
| 1st Half | |
|---|---|
| Volumes | 19 |
| Prices | 3 |
| Portfolio measures | 4 |
| Currencies | 2 |
| 28 |
In the Chemicals segment, sales volumes in all divisions increased sharply; some capacity-related delivery bottlenecks occurred. Sales were well above the level of the first half of 2009. The Petrochemicals division in particular posted sharply higher sales thanks to price increases. The scheduled maintenance shutdown at the Nanjing site in the second quarter of 2010 had a negative impact on earnings. Nevertheless, earnings significantly improved compared with the weak first half of 2009
thanks to the considerable rise in volumes and higher margins, such as those for ammonia and petrochemicals.
The business environment for the Plastics segment has been recovering steadily since the beginning of 2010. Thanks to stronger demand, sales in the segment grew sharply compared with the same period of the previous year. In the Performance Polymers division, demand for polyamide intermediates exceeded available supply and margins rose. Additionally, higher volumes contributed to a significant improvement in earnings.
| 1st half sales (million €) | ||||||
|---|---|---|---|---|---|---|
| -- | ---------------------------- | -- | -- | -- | -- | -- |
| Chemicals | 2010 | 5,558 | 65% |
|---|---|---|---|
| 2009 | 3,365 | ||
| Plastics | 2010 | 4,781 | 49% |
| 2009 | 3,213 | ||
| Performance | 2010 | 6,022 | 46% |
| Products | 2009 | 4,120 | |
| Functional | 2010 | 4,543 | 37% |
| Solutions | 2009 | 3,323 | |
| Agricultural | 2010 | 2,356 | 2% |
| Solutions | 2009 | 2,320 | |
| Oil & Gas | 2010 | 5,599 | (12%) |
| 2009 | 6,346 | ||
| Other | 2010 | 2,809 | 38% |
| 2009 | 2,034 |
In the Performance Products segment, sales in all divisions increased markedly thanks to rising product demand. They were additionally boosted in the first quarter of 2010 by the inclusion of the Ciba businesses, which have now been integrated. Due to the limited availability of important intermediates, there were some delivery bottlenecks. Both the economic upturn and the realization of synergies had a positive impact on earnings. All divisions posted a significant increase in earnings compared with the same period in 2009.
The Functional Solutions segment benefited primarily from the rising demand in the automotive sector. A sharp increase in precious metals prices also helped boost sales. Earnings were well above the level of the weak first half of 2009. Although the situation in the construction industry remained difficult, the Construction Chemicals division was also able to improve earnings thanks to higher volumes and successful cost reduction.
In the Agricultural Solutions segment, unfavorable weather conditions in the northern hemisphere had a negative impact on sales. Sales increased in Asia and South America thanks to higher sales volumes. In North America, strong demand for our innovative herbicide Kixor™ nearly compensated for the declining sales volumes in fungicides. Overall, sales increased slightly thanks to positive currency effects. Targeted increases in selling expenses as well as research and development expenses had a negative impact on earnings, which did not match the level of the first half of 2009.
Sales in the Oil & Gas segment declined compared with the same period of 2009, primarily as a result of the sharp drop in natural gas prices. Even the significant increase in gas trading volumes could not offset this effect. As a result of OPEC production restrictions in Libya, oil production volumes fell. Furthermore, the negative time-lag effect was detrimental to margins in both business areas. Overall, earnings did not match those of the same period of the previous year.
In Other, sales increased sharply compared with the first half of 2009. This was due mainly to positive business development in the Styrenics business, where earnings increased significantly. Provisions for the BASF option program had a negative impact on earnings because BASF shares outperformed the benchmark index MSCI World Chemicals in the first half of 2010.
Special items of minus €241 million (first half of 2009: minus €425 million) primarily resulted from the integration of Ciba and expenses for planned restructuring measures.
Compared with the same period of the previous year, EBIT grew by €2,219 million to €3,919 million. EBITDA rose by €2,331 million to €5,494 million. The EBITDA margin increased to 17.3% (first half of 2009: 12.8%).
| Chemicals | 2010 | 1,148 | +806 | |
|---|---|---|---|---|
| 2009 | 342 | |||
| Plastics | 2010 | 628 | +519 | |
| 2009 | 109 | |||
| Performance | 2010 | 890 | +687 | |
| Products | 2009 | 203 | ||
| Functional | 2010 | 276 | +274 | |
| Solutions | 2009 | 2 | ||
| Agricultural | 2010 | 641 | (70) | |
| Solutions | 2009 | 711 | ||
| Oil & Gas | 2010 | 1,144 | (87) | |
| 2009 | 1,231 | |||
| Other | 2010 | (567) | (94) | |
| 2009 | (473) | |||
The financial result was minus €173 million, an improvement of €88 million compared with the same period of the previous year. This was primarily attributable to improved earnings at OAO Severneftegazprom which were mainly a result of currency gains. OAO Severneftegazprom, which holds the license to operate the Yuzhno Russkoye natural gas field, is accounted for using the equity method.
Income before taxes and minority interests increased by €2,307 million to €3,746 million. At 33.5%, the tax rate was lower than in the first half of 2009 due to the lower share of earnings from the highly-taxed Oil & Gas segment.
Net income increased by €1,494 million to €2,212 million. Earnings per share amounted to €2.41 in the first half of 2010 compared with €0.78 in the same period of the previous year. Adjusted for special items and amortization of intangible assets, earnings per share were €2.82 (first half of 2009: €1.34).
Information on the calculation of adjusted earnings per share can be found on page 33
| 2nd Quarter 2010 | 1st Half 2010 |
|---|---|
| 2.0 | 7.8 |
| (3.1) | 0.1 |
| (10.2) | (11.1) |
| (11.9) | (9.0) |
| (13.0) | (10.1) |
| 44.97 | 43.72 |
| 48.55 | 48.55 |
| 40.71 | 39.43 |
| 45.11 | 45.11 |
| 6.2 | 5.1 |
| 918.5 | 918.5 |
| 41.4 | 41.4 |
At the end of the second quarter, BASF shares traded at €45.11, a decline of 1.8% compared with the closing price in the first quarter of 2010. Assuming the dividend of €1.70 paid out on April 30, 2010 was reinvested, our share performance in the second quarter was around 2%. The BASF stock thus outperformed the German and European stock markets, whose leading indices the DAX 30 and DJ EURO STOXX 50 lost 3.1% and 10.2% of their value, respectively, in the same period. The global industry indices DJ Chemicals and MSCI World Chemicals also lost 11.9% and 13%, respectively, compared with their value in the first quarter.
For up-to-date information on BASF shares online, visit basf.com/share
Following the June 2010 announcement of BASF's planned acquisition of specialty chemicals company Cognis, Standard & Poor's lowered its long-term rating by one notch to "A"; Moody's put its long-term A1 rating "under review for possible downgrade." BASF's short-term ratings were confirmed by both agencies at their highest level. With an "A/A-1 outlook stable" rating from rating agency Standard & Poor's and "A1/P-1 rating under review" from Moody's, BASF continues to have good credit ratings, also compared with its competitors in the chemical industry.
For the fourth time in a row, BASF has won the Investor Relations award from the business magazine Capital. Furthermore, in the Thomson Extel Pan-European Survey 2010, BASF's Investor Relations team was honored as "Best IR Team in Europe" and "Best IR Team in the Chemicals Sector." Additionally, in a survey for the U.K.'s IR Magazine, BASF was honored multiple times for its Investor Relations work.
1 Adjusted for two-for-one stock split conducted in the second quarter of 2008.
BASF reached an agreement with the owners of Cognis Holding Luxembourg S.à r.l. to acquire the specialty chemicals company Cognis. Cognis is a leading supplier of innovative system solutions and products based on renewable raw materials for the health and nutrition market as well as the cosmetics, detergents and cleaners industries. By acquiring Cognis, BASF is strengthening its portfolio with cyclically robust and profitable businesses and further expanding its position as the world's leading chemical company. The acquisition is subject to clearance by the competent authorities. We aim to close the transaction in November 2010.
BASF and Monsanto are expanding their cooperation in maximizing crop yield. Wheat will be added to the companies' joint plant biotechnology pipeline, which already includes corn (maize), soy, cotton and canola (oil-seed rape). In addition, the partners are increasing their investments in the collaboration. Originally, the two companies dedicated a joint budget of around \$1.5 billion; the new agreement will result in a potential additional investment of more than \$1 billion. BASF and Monsanto have been working together since 2007 on the development of higher-yielding and stress-tolerant crops.
Nord Stream AG has taken on GDF SUEZ S.A. as a fifth shareholder in the consortium. The French energy company is acquiring a 4.5% stake each from founding members Wintershall and E.ON Ruhrgas, giving it a 9% holding in Nord Stream AG. Gazprom continues to have a 51% stake while N.V. Nederlandse Gasunie holds 9%. E.ON Ruhrgas and Wintershall now each hold a 15.5% stake. The participation of GDF SUEZ strengthens the European dimension of the Nord Stream project, which will significantly improve Europe's natural gas infrastructure. Construction on the pipeline began in April 2010. It is scheduled to start transporting Russian gas to Europe in 2011.
BASF began construction on the world's largest production plant for the aroma chemical L-menthol at the company's Ludwigshafen site. L-menthol is an ingredient in numerous flavoring, dental care and pharmaceutical products and is the world's top-selling aroma chemical. With construction of this plant, BASF is adding another important product to its citral value-adding chain and strengthening its position as a leading supplier of aroma chemicals. The new plant is expected to start up in 2012.
The global economy began to see a strong upturn in the fourth quarter of 2009 and this trend continued in the first half of 2010. Rising demand led to a significant increase in global industrial production. At the same time, the situation on international financial markets intensified again in the second quarter as a result of the high debt level in some European countries. Government stimulus programs helped boost certain industries and also bolstered consumer spending. Against the backdrop of positive business expectations, companies ramped up their investing activities again. However, leading indicators suggest a diminishing growth dynamic in Asia and North America.
Global gross domestic product grew by around 4% in the first half of 2010 compared with the same period of the previous year. The global economic growth was driven mainly by the positive trend in Asia. Compared with the same period of the previous year, global industrial production increased by around 10%.
The outlook for the full year 2010 can be found on page 15
| 2nd Quarter | 1st Half | |||||
|---|---|---|---|---|---|---|
| 2010 | 2009 | Change in % | 2010 | 2009 | Change in % | |
| 2,970 | 1,809 | 64 | 5,558 | 3,365 | 65 | |
| 325 | 235 | 38 | 607 | 458 | 33 | |
| 1,997 | 1,127 | 77 | 3,720 | 2,037 | 83 | |
| 648 | 447 | 45 | 1,231 | 870 | 41 | |
| 859 | 419 | 105 | 1,485 | 657 | 126 | |
| 687 | 258 | 166 | 1,148 | 342 | 236 | |
| 687 | 258 | 166 | 1,148 | 341 | 237 | |
| 6,635 | 5,817 | 14 | – | – | – | |
| 31 | 32 | (3) | 62 | 66 | (6) | |
| 115 | 111 | 4 | 202 | 213 | (5) | |
All divisions in the Chemicals segment benefited from strong product demand. Sales increased sharply compared with the second quarter of 2009, which had been weak due to the economic crisis. Higher prices and positive currency effects contributed to the sales growth (volumes 21%, prices 36%, portfolio 0%, currencies 7%). The availability of numerous products was limited due to insufficient capacity. Thanks to a significant improvement in the business environment, income from operations before special items was substantially higher than in the second quarter of 2009. Following the scheduled maintenance shutdown of our Verbund site in Nanjing, all plants were successfully started up again. Despite the impact of the shutdown, earnings also improved compared with the first quarter of 2010.
Improved demand and slightly higher prices led to a sales increase in the Inorganics division. Our businesses with electronic chemicals, metal systems and inorganic salts performed exceptionally well. Earnings in all business areas were significantly above the level of the second quarter of 2009. This was driven by the upswing in business as well as an increase in the margin for ammonia.
In the Petrochemicals division, we also experienced high demand in all regions and business areas. Sales grew substantially compared with the same period of the previous year. The availability of numerous products such as ethylene, propylene and benzene remained limited until the end of the second quarter. The sharp increase in raw materials costs could therefore be passed on to the market. As a result of the positive business environment, the increase in earnings was exceptionally strong compared with the second quarter of 2009.
Sales in the Intermediates division improved year-on-year thanks to substantial volume increases in all regions. The available supply of some products – for example, in the butanediol value-adding chain as well as polyalcohols and several specialty amines – could not fully meet the demand of our customers in the second quarter of 2010. In addition to good capacity utilization, an advantageous product mix contributed to markedly higher earnings.
Chemicals 2nd Quarter 2010 (change compared with 2nd quarter 2009)
Sales EBIT
before special items (million €)
| 2nd Quarter | 1st Half | ||||||
|---|---|---|---|---|---|---|---|
| 2010 | 2009 | Change in % | 2010 | 2009 | Change in % | ||
| Sales to third parties | 2,584 | 1,750 | 48 | 4,781 | 3,213 | 49 | |
| Thereof Performance Polymers | 1,184 | 750 | 58 | 2,161 | 1,347 | 60 | |
| Polyurethanes | 1,400 | 1,000 | 40 | 2,620 | 1,866 | 40 | |
| Income from operations before depreciation and amortization (EBITDA) | 461 | 247 | 87 | 842 | 325 | 159 | |
| Income from operations (EBIT) before special items | 349 | 138 | 153 | 628 | 109 | 476 | |
| Income from operations (EBIT) | 350 | 139 | 152 | 627 | 109 | 475 | |
| Assets | 5,383 | 4,522 | 19 | – | – | – | |
| Research expenses | 37 | 32 | 16 | 72 | 64 | 13 | |
| Additions to property, plant and equipment and intangible assets | 55 | 64 | (14) | 96 | 127 | (24) | |
Following continuous improvement in the business environment over the previous quarters, demand in the Plastics segment stabilized at a high level in the second quarter of 2010. Sales were 48% higher than the weak level of the second quarter of 2009 (volumes 27%, prices 14%, portfolio 0%, currencies 7%). Higher prices in the Performance Polymers division supported this development. In addition to our good capacity utilization, the positive effects of our restructuring measures are also reflected in the income from operations before special items: Compared with the second quarter of 2009, we posted an increase of more than €211 million. Despite a number of scheduled maintenance shutdowns in the second quarter of 2010, we were able to surpass the earnings level of the first quarter in part thanks to the seasonal upswing in our business with foams for the construction sector.
Positive business development continued in all business areas of the Performance Polymers division. Sales rose by more than 50% compared with the previous second quarter. Due to shortages of various raw materials, our ability to deliver polyamide 6,6 and engineering plastics could not keep pace with demand. Particularly in Europe and Asia, polyamide intermediates were not sufficiently available. Due to the strong demand, we were able to pass on higher raw materials costs to our customers. Increased sales volumes in all business areas and a good margin level for polyamide intermediates were the main reasons why earnings improved significantly compared with the previous second quarter.
Sales volumes in the Polyurethanes segment grew in all business areas compared with the second quarter of 2009. Thanks to strong demand, particularly from the automotive industry, business development was very pleasing, especially in our business with specialties. With prices remaining generally stable, sales grew substantially. In some business areas, sharp increases in raw materials prices had a negative impact on margins. As a result of larger sales volumes, we were able to increase earnings compared to the second quarter of 2009 and slightly exceed the good level of the first quarter of 2010.
Plastics 2nd Quarter 2010 (change compared with 2nd quarter 2009)
Sales EBIT
before special items (million €)
+48% +211
Innovative and high-growth specialties
| 2nd Quarter | 1st Half | |||||||
|---|---|---|---|---|---|---|---|---|
| 2010 | 2009 | Change in % | 2010 | 2009 | Change in % | |||
| Sales to third parties | 3,151 | 2,443 | 29 | 6,022 | 4,120 | 46 | ||
| Thereof Dispersions & Pigments | 857 | 674 | 27 | 1,580 | 1,119 | 41 | ||
| Care Chemicals | 1,048 | 825 | 27 | 2,051 | 1,623 | 26 | ||
| Paper Chemicals | 440 | 341 | 29 | 860 | 538 | 60 | ||
| Performance Chemicals | 806 | 603 | 34 | 1,531 | 840 | 82 | ||
| Income from operations before depreciation and amortization (EBITDA) | 633 | 6 | 1,171 | 222 | 427 | |||
| Income from operations (EBIT) before special items | 471 | 80 | 489 | 890 | 203 | 338 | ||
| Income from operations (EBIT) | 450 | (214) | 791 | (91) | ||||
| Assets | 10,318 | 10,131 | 2 | – | – | – | ||
| Research expenses | 72 | 77 | (6) | 146 | 126 | 16 | ||
| Additions to property, plant and equipment and intangible assets | 68 | 3,779 | (98) | 115 | 3,853 | (97) | ||
All divisions in the Performance Products segment were able to significantly increase their sales year-on-year thanks to higher volumes and prices. The depreciation of the euro against numerous currencies also helped to boost sales (volumes 16%, prices 4%, portfolio 4%, currencies 5%). There were delivery bottlenecks in some product lines due to the limited availability of important intermediates. The strong earnings growth is attributable to the realization of synergies and the favorable business environment. All divisions made a clearly positive contribution to income from operations before special items. Sales and earnings in the segment surpassed the level of the first quarter of 2010.
Sales and sales volumes in all business areas of the Dispersions & Pigments division were above the level of the second quarter of 2009. There was a marked revival in demand, for example, from the automotive and packaging industries. As a result of the limited availability of important intermediates we were generally able to pass on higher raw materials costs to our customers. Earnings increased considerably as a result of the good business development.
Thanks to strong market demand in the Care Chemicals division, volumes in all business areas increased substantially. Sales again reached a record level. As a result of the good volume trend, earnings clearly surpassed the level of the second quarter of 2009. The stronger U.S. dollar had a positive impact on sales and earnings.
In the Paper Chemicals division, sales volumes rose noticeably compared with the second quarter of 2009. Sales also grew thanks to higher prices. We were able to further reduce fixed costs through successful restructuring measures. In a continuing difficult market environment, the division made a clearly positive contribution to the segment's earnings.
Business recovery continued in the customer industries of the Performance Chemicals division, such as the automotive and plastics processing industries. The capacity utilization of our plants was higher than in the second quarter of 2009; sales increased markedly. As well, our cost reduction programs proved effective. We improved earnings considerably.
Sales EBIT
before special items (million €)
+29% +391
Customer-specific products and system solutions
| 1st Half | |||||||
|---|---|---|---|---|---|---|---|
| Change in % | |||||||
| Sales to third parties | 2,453 | 1,755 | 40 | 4,543 | 3,323 | 37 | |
| Thereof Catalysts | 1,225 | 677 | 81 | 2,289 | 1,328 | 72 | |
| Construction Chemicals | 576 | 536 | 7 | 1,008 | 984 | 2 | |
| Coatings | 652 | 542 | 20 | 1,246 | 1,011 | 23 | |
| Income from operations before depreciation and amortization (EBITDA) | 266 | 129 | 106 | 468 | 176 | 166 | |
| Income from operations (EBIT) before special items | 165 | 48 | 244 | 276 | 2 | ||
| Income from operations (EBIT) | 164 | 29 | 466 | 275 | (16) | ||
| 9,491 | 8,227 | 15 | – | – | – | ||
| Research expenses | 47 | 42 | 12 | 85 | 86 | (1) | |
| Additions to property, plant and equipment and intangible assets | 40 | 40 | – | 68 | 76 | (11) | |
| 2010 | 2nd Quarter 2009 |
Change in % | 2010 | 2009 |
Following a considerable recovery of the market in Asia, demand from the automotive industry in Europe and North America also began to pick up again. Sales volumes in all regions climbed significantly from the exceptionally low levels seen in the second quarter of the previous year. Positive currency effects and higher precious metals prices helped to boost sales (volumes 19%, prices 11%, portfolio 1%, currencies 9%). All divisions increased their income from operations before special items. This was a result of both an improved business environment as well as successful restructuring measures.
Sales in the Catalysts division increased sharply. Sales volumes for mobile emission catalysts in particular grew thanks to the recovery in the automotive sector. Sales in precious metals trading rose on account of higher volumes and prices to €609 million (second quarter of 2009: €261 million). For chemical and refinery catalysts, sales overall were slightly above the level in the same quarter of the previous year. Thanks to increased volumes and lower fixed costs, the division again made a significant contribution to earnings following a loss posted in the second quarter of 2009.
The market situation in the construction industry remained difficult as a result of the ongoing low level of private investment in new building projects. Prices and sales volumes matched the level of the second quarter of 2009 due in part to a robust renovation business and growth in emerging economies. Sales in the Construction Chemicals division grew slightly thanks to positive currency effects. With strict cost and pricing discipline, we were able to increase earnings considerably despite the difficult market environment.
The global rise in automobile production was the main reason for this division's increase in sales volumes. We also experienced good order volume in the business areas automotive refinish coatings and architectural coatings. The Coating division's sales surpassed the low level of the second quarter of 2009. Earnings improved significantly thanks to higher volumes. Despite the negative impact from rising raw materials costs, earnings were also higher than in the first quarter of 2010.
Functional Solutions 2nd Quarter 2010 (change compared with 2nd quarter 2009)
Sales EBIT
before special items (million €)
+40% +117
Innovations for the health of crops
| 2nd Quarter | 1st Half | ||||||
|---|---|---|---|---|---|---|---|
| 2010 | 2009 | Change in % | 2010 | 2009 | Change in % | ||
| Sales to third parties | 1,211 | 1,175 | 3 | 2,356 | 2,320 | 2 | |
| Income from operations before depreciation and amortization (EBITDA) | 370 | 415 | (11) | 739 | 803 | (8) | |
| Income from operations (EBIT) before special items | 320 | 367 | (13) | 641 | 711 | (10) | |
| Income from operations (EBIT) | 320 | 366 | (13) | 641 | 706 | (9) | |
| Assets | 5,478 | 5,118 | 7 | – | – | – | |
| Research expenses | 102 | 86 | 19 | 186 | 167 | 11 | |
| Additions to property, plant and equipment and intangible assets | 25 | 66 | (62) | 51 | 111 | (54) | |
Despite unfavorable weather conditions, sales were above the level of the second quarter of 2009. Positive currency effects and an increase in volumes in the regions South America and Asia contributed to this development (volumes 1%, prices –4%, portfolio 0%, currencies 6%).
In Europe, we increased sales in particular thanks to rising sales volumes for oilseed herbicides in eastern Europe and for corn (maize) herbicides in western Europe. As a result of the late season start, there was a decline in the business with fungicides compared with the second quarter of 2009.
Sales decreased in the region North America. In particular, demand for our fungicides (Headline®) weakened because distributors were holding larger inventories; prices declined. The sales decline could be partially offset by high sales volumes of our successfully launched herbicide Kixor™.
In Asia, sales exceeded the level of second quarter of 2009. This was due mainly to rising demand for herbicides for soybean cultivation in India.
Business in the region South America developed better year-on-year thanks to strong volume increases. The sugar cane market recovered appreciably; demand for insecticides increased. A good seasonal business with soy fungicides also contributed to sales growth.
Income from operations before special items did not match the record level of the second quarter of 2009. This was due to price declines and targeted increases in selling expenses as well as research and development expenses.
| 1 | Fungicides | 43% |
|---|---|---|
| 2 | Herbicides | 39% |
| 3 | Insecticides/other | 18% |
| 1 | Europe | 46% |
|---|---|---|
| 2 | North America | 32% |
| 3 | Asia Pacific | 10% |
| 4 | South America, Africa, Middle East |
12% |
Sales EBIT
before special items (million €)
+3% –47
Exploration and production of crude oil and natural gas; Trading, transportation and storage of natural gas
| 2nd Quarter | 1st Half | |||||||
|---|---|---|---|---|---|---|---|---|
| 2010 | 2009 | Change in % | 2010 | 2009 | Change in % | |||
| Sales to third parties | 2,374 | 2,452 | (3) | 5,599 | 6,346 | (12) | ||
| Thereof Exploration & Production | 854 | 946 | (10) | 1,879 | 1,983 | (5) | ||
| Natural Gas Trading | 1,520 | 1,506 | 1 | 3,720 | 4,363 | (15) | ||
| Income from operations before depreciation and amortization (EBITDA) | 642 | 625 | 3 | 1,409 | 1,464 | (4) | ||
| Thereof Exploration & Production | 512 | 552 | (7) | 1,099 | 1,100 | |||
| Natural Gas Trading | 130 | 73 | 78 | 310 | 364 | (15) | ||
| Income from operations (EBIT) before special items | 515 | 506 | 2 | 1,144 | 1,231 | (7) | ||
| Thereof Exploration & Production | 420 | 469 | (10) | 904 | 940 | (4) | ||
| Natural Gas Trading | 95 | 37 | 157 | 240 | 291 | (18) | ||
| Income from operations (EBIT) | 515 | 506 | 2 | 1,144 | 1,231 | (7) | ||
| Thereof Exploration & Production | 420 | 469 | (10) | 904 | 940 | (4) | ||
| Natural Gas Trading | 95 | 37 | 157 | 240 | 291 | (18) | ||
| Assets | 8,244 | 7,979 | 3 | – | – | – | ||
| Thereof Exploration & Production | 5,062 | 4,942 | 2 | – | – | – | ||
| Natural Gas Trading | 3,182 | 3,037 | 5 | – | – | – | ||
| Exploration expenses | 41 | 31 | 32 | 88 | 51 | 73 | ||
| Additions to property, plant and equipment and intangible assets | 169 | 270 | (37) | 303 | 462 | (34) | ||
| Income taxes on oil-producing operations non-compensable with German corporate income tax |
209 | 226 | (8) | 436 | 380 | 15 | ||
| Net income | 148 | 181 | (18) | 421 | 394 | 7 | ||
In the Oil & Gas segment, sales were slightly below the level of the second quarter of 2009. As a result of OPEC production restrictions in Libya, our oil production decreased; prices for natural gas declined. Rising volumes in natural gas trading could not offset these effects (volumes 4%, prices/currencies –7%, portfolio 0%). Income from operations before special items grew slightly year-on-year thanks to higher gas trading volumes.
Despite higher oil prices, the business sector Exploration & Production posted a sales decline compared with the second quarter of 2009. This was mainly attributable to OPEC production restrictions in Libya, which had a negative effect on our oil production. The average price for Brent crude oil was \$78 per barrel, compared with \$59 per barrel (+32%) in the second quarter of 2009. In euro terms, the oil price rose to €62 per barrel, an increase of 42%. Earnings declined slightly due to lower volumes.
Thanks to cool weather and the economic upturn, we increased sales volumes in Natural Gas Trading significantly. Despite the steep decline in natural gas prices, sales were at the level of the second quarter of 2009. The improvement in earnings is primarily attributable to the positive volume trend.
2nd Quarter 2010 (change compared with 2nd quarter 2009)
Sales EBIT
before special items (million €)
–3% +9
1st Half 2010
| Sales Location of company |
Sales Location of customer |
EBIT before special items |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| 2010 | 2009 | Change in % |
2010 | 2009 | Change in % |
2010 | 2009 | Change in % |
|
| 2nd Quarter | |||||||||
| Europe | 8,743 | 7,296 | 20 | 8,300 | 6,748 | 23 | 1,383 | 696 | 99 |
| Thereof Germany | 6,256 | 5,031 | 24 | 2,981 | 2,350 | 27 | 990 | 446 | 122 |
| North America | 3,637 | 2,587 | 41 | 3,498 | 2,637 | 33 | 463 | 189 | 145 |
| Asia Pacific | 3,004 | 1,994 | 51 | 3,210 | 2,220 | 45 | 293 | 193 | 52 |
| South America, Africa, Middle East | 830 | 625 | 33 | 1,206 | 897 | 34 | 67 | 62 | 8 |
| 16,214 | 12,502 | 30 | 16,214 | 12,502 | 30 | 2,206 | 1,140 | 94 | |
| 1st Half | |||||||||
| Europe | 17,700 | 15,303 | 16 | 16,702 | 14,392 | 16 | 2,634 | 1,493 | 76 |
| Thereof Germany | 12,722 | 11,096 | 15 | 6,261 | 5,589 | 12 | 1,908 | 872 | 119 |
| North America | 6,804 | 4,738 | 44 | 6,710 | 4,808 | 40 | 792 | 262 | 202 |
| Asia Pacific | 5,560 | 3,475 | 60 | 5,959 | 3,829 | 56 | 603 | 246 | 145 |
| South America, Africa, Middle East | 1,604 | 1,205 | 33 | 2,297 | 1,692 | 36 | 131 | 124 | 6 |
| 31,668 | 24,721 | 28 | 31,668 | 24,721 | 28 | 4,160 | 2,125 | 96 |
Sales by companies in Europe were 16% higher than in the same period of the previous year. Income from operations before special items rose by €1,141 million to €2,634 million. Thanks to higher demand in the chemicals business2 we posted vigorous sales and earnings growth compared with the weak first half of 2009. In the Oil & Gas segment, sales and earnings did not match the level of the first half of the previous year due to the decline in natural gas prices.
In North America, sales grew by 42% in U.S. dollars and 44% in euro terms. Earnings rose by €530 million to €792 million. Thanks to higher volumes, sales and earnings in the chemicals business increased sharply. The economic situation in the construction industry remained difficult. Sales and earnings in the Agricultural Solutions segment were below the very good level of the previous year's first half, due in part to lower sales volumes in our fungicides business.
Sales in the Asia Pacific region rose by 55% in localcurrency terms, and by 60% in euro terms. Earnings grew by €357 million to reach €603 million. The dynamic economic upturn had a particularly positive effect on our chemicals business; all divisions posted significant increases in sales and earnings. In the Agricultural Solutions segment, sales and earnings also exceeded the level in the same period of the previous year.
In South America, Africa, Middle East sales were up year-onyear by 21% in local-currency terms and by 33% in euro. Our successful Agricultural Solutions business in South America made an important contribution to this sales growth. The Coatings division posted a significant increase in sales as well, despite declining prices for architectural coatings. Earnings in the region were slightly above the level of the first half of 2009.
2 Our chemicals business includes the Chemicals, Plastics, Performance Products and Functional Solutions segments.
BASF and U.S. research institute RTI International are joining forces to develop a new technology to capture carbon dioxide (CO2 ) from waste gases emitted by coal-fired power plants and other industrial sources. Efficient solvents are essential for carbon capture. In this collaboration, initially set to run for three years, the partners will develop novel non-aqueous solvent systems that can be recycled. The capture process could use up to 40% less energy than conventional amine-based processes. The development project is sponsored by a \$2 million cooperative agreement from the U.S. Department of Energy.
BASF, the London School of Hygiene & Tropical Medicine and the Innovative Vector Control Consortium are developing a new generation of malaria prevention products based on the BASF insecticide chlorfenapyr. The goal of this research effort is to reduce malaria in areas where mosquitoes are already becoming resistant to existing solutions. The new product series will include residual wall sprays as well as long-lasting insecticide treated nets. The first products are expected to be launched on the market in 2011.
Compared with the end of 2009, the number of BASF Group employees decreased by 1,495 to a total of 103,284 as of June 30, 2010. This was due to restructuring in the course of the Ciba integration. On June 30, 64.4% of BASF Group employees were employed in Europe while North America accounted for 15.2% of employees, Asia Pacific for 14.3% and South America, Africa, Middle East for 6.1%.
Compared with the same period of the previous year, personnel costs in the first half 2010 increased by 23.4% to €4,116 million. This was a result of the Ciba acquisition as well as higher provisions for the BASF options program and performance-related salary components.
| June 30, 2010 |
Dec. 31, 2009 |
Change in % |
|
|---|---|---|---|
| Europe | 66,517 | 67,621 | (2) |
| North America | 15,658 | 16,027 | (2) |
| Asia Pacific | 14,747 | 14,817 | |
| South America, Africa, Middle East | 6,362 | 6,314 | 1 |
| 103,284 | 104,779 | (1) |
1 The regional classification of some Central American countries has been changed, the previous year's figures have been adjusted.
Global chemical production benefited from a strong upturn in the global economy in the first half of 2010. Demand was additionally driven by our customers' inventory restocking. In this economic environment, our business developed more favorably than we had expected. However, there continue to be risks regarding a self-sustaining, lasting recovery.
We expect that economic recovery will continue at a moderate pace in the second half of 2010. Overall, we expect higher sales and a significant increase in earnings in 2010. We anticipate that we will earn a premium on our cost of capital again.
Despite the economic upturn, risks remain for a sustained recovery. The high debt level of some European countries is threatening the stability of the financial and banking system. It will be necessary for governments around the world to reduce spending, which will dampen demand, as will the winding down of national stimulus programs. Other risks are primarily associated with
We see opportunities in consistently implementing our strategy and further improving our operational excellence. We will continue to concentrate on portfolio improvements, restructuring and increasing efficiency as well as on product innovations and expanding our business in growth markets. Therefore we will continue to strengthen our research and development activities.
An important milestone in the successful implementation of our strategy is our agreement to acquire the specialty chemicals company Cognis. With this acquisition, we are strengthening our position in cyclically robust and profitable business areas such as health and nutrition as well as cosmetics, detergents and cleaners. We are particularly expanding our portfolio with products based on renewable resources. We aim to close this acquisition in November 2010. The Cognis businesses will be integrated into the Performance Products segment, in which a new Nutrition & Health division will be created.
The statements on opportunities and risks made in the BASF Report 2009 remain valid.
Current information can be found in the BASF Report 2009, in the Risk Report on pages 103–111
We have updated our expectations for the global economy in 2010 (previous forecast in parentheses):
We expect our sales to grow in 2010 and outpace global chemical production. We anticipate that income from operations before special items will improve considerably and we will again earn a premium on our cost of capital.
| 2nd Quarter | 1st Half | |||||
|---|---|---|---|---|---|---|
| Further information in Note | 2010 | 2009 | Change in % |
2010 | 2009 | Change in % |
| Sales | 16,214 | 12,502 | 29.7 | 31,668 | 24,721 | 28.1 |
| Cost of sales | 11,314 | 8,963 | 26.2 | 22,342 | 18,081 | 23.6 |
| Gross profit on sales | 4,900 | 3,539 | 38.5 | 9,326 | 6,640 | 40.5 |
| Selling expenses | 1,679 | 1,461 | 14.9 | 3,174 | 2,754 | 15.3 |
| General and administrative expenses | 270 | 288 | (6.3) | 545 | 546 | (0.2) |
| Research expenses | 376 | 352 | 6.8 | 726 | 677 | 7.2 |
| Other operating income (5) |
283 | 123 | 130.1 | 502 | 543 | (7.6) |
| Other operating expenses (5) |
779 | 789 | (1.3) | 1,464 | 1,506 | (2.8) |
| Income from operations | 2,079 | 772 | 169.3 | 3,919 | 1,700 | 130.5 |
| Income from companies accounted for using the equity method | 38 | 60 | (36.7) | 104 | 16 | |
| Other income from participations | 39 | 69 | (43.5) | 51 | 73 | (30.1) |
| Other expenses from participations | 7 | 3 | 133.3 | 9 | 4 | 125.0 |
| Interest income | 29 | 37 | (21.6) | 57 | 58 | (1.7) |
| Interest expense | 195 | 201 | (3.0) | 373 | 339 | 10.0 |
| Other financial result | 3 | (21) | (3) | (65) | 95.4 | |
| Financial result (6) |
(93) | (59) | (57.6) | (173) | (261) | 33.7 |
| Income before taxes and minority interests | 1,986 | 713 | 178.5 | 3,746 | 1,439 | 160.3 |
| Income taxes (7) |
645 | 362 | 78.2 | 1,256 | 631 | 99.0 |
| Income before minority interests | 1,341 | 351 | 282.1 | 2,490 | 808 | 208.2 |
| Minority interests (8) |
158 | 8 | 278 | 90 | 208.9 | |
| Net income | 1,183 | 343 | 244.9 | 2,212 | 718 | 208.1 |
| Earnings per share (€) (9) |
||||||
| Undiluted (9) |
1.29 | 0.37 | 248.6 | 2.41 | 0.78 | 209.0 |
| Diluted (9) |
1.29 | 0.37 | 248.6 | 2.41 | 0.78 | 209.0 |
| Further information in Note | June 30, 2010 |
June 30, 2009 |
Change in % |
Dec. 31, 2009 |
Change in % |
|---|---|---|---|---|---|
| Intangible assets (10) |
11,117 | 11,106 | 0.1 | 10,449 | 6.4 |
| Property, plant and equipment (10) |
16,926 | 17,065 | (0.8) | 16,285 | 3.9 |
| Investments accounted for using the equity method | 1,239 | 1,226 | 1.1 | 1,340 | (7.5) |
| Other financial assets | 1,601 | 1,629 | (1.7) | 1,619 | (1.1) |
| Deferred tax assets | 1,192 | 1,035 | 15.2 | 1,042 | 14.4 |
| Other receivables and miscellaneous short-term assets | 606 | 842 | (28.0) | 946 | (35.9) |
| Long-term assets | 32,681 | 32,903 | (0.7) | 31,681 | 3.2 |
| Inventories (11) |
7,890 | 6,299 | 25.3 | 6,776 | 16.4 |
| Accounts receivable, trade (11) |
10,181 | 8,106 | 25.6 | 7,738 | 31.6 |
| Other receivables and miscellaneous short-term assets (11) |
3,598 | 2,851 | 26.2 | 3,223 | 11.6 |
| Marketable securities (11) |
18 | 117 | (84.6) | 15 | 20.0 |
| Cash and cash equivalents (11) |
2,107 | 2,909 | (27.6) | 1,835 | 14.8 |
| Short-term assets | 23,794 | 20,282 | 17.3 | 19,587 | 21.5 |
| Total assets | 56,475 | 53,185 | 6.2 | 51,268 | 10.2 |
| Further information in Note | June 30, 2010 |
June 30, 2009 |
Change in % |
Dec. 31, 2009 |
Change in % |
|---|---|---|---|---|---|
| Subscribed capital (12) |
1,176 | 1,176 | – | 1,176 | – |
| Capital surplus (12) |
3,229 | 3,246 | (0.5) | 3,229 | – |
| Retained earnings (12) |
12,866 | 12,331 | 4.3 | 12,916 | (0.4) |
| Other comprehensive income | 1,274 | 8 | 156 | ||
| Equity of shareholders of BASF SE | 18,545 | 16,761 | 10.6 | 17,477 | 6.1 |
| Minority interests | 1,305 | 1,099 | 18.7 | 1,132 | 15.3 |
| Stockholders' equity | 19,850 | 17,860 | 11.1 | 18,609 | 6.7 |
| Provisions for pensions and similar obligations (13) |
3,199 | 2,268 | 41.0 | 2,255 | 41.9 |
| Other provisions (14) |
3,552 | 3,166 | 12.2 | 3,289 | 8.0 |
| Deferred tax liabilities | 2,129 | 2,202 | (3.3) | 2,093 | 1.7 |
| Financial indebtedness (15) |
11,705 | 13,124 | (10.8) | 12,444 | (5.9) |
| Other long-term liabilities (15) |
940 | 1,060 | (11.3) | 898 | 4.7 |
| Long-term liabilities | 21,525 | 21,820 | (1.4) | 20,979 | 2.6 |
| Accounts payable, trade | 4,334 | 2,976 | 45.6 | 2,786 | 55.6 |
| Provisions (14) |
3,178 | 2,935 | 8.3 | 3,276 | (3.0) |
| Tax liabilities | 1,198 | 958 | 25.1 | 1,003 | 19.4 |
| Financial indebtedness (15) |
3,880 | 4,063 | (4.5) | 2,375 | 63.4 |
| Other short-term liabilities (15) |
2,510 | 2,573 | (2.4) | 2,240 | 12.1 |
| Short-term liabilities | 15,100 | 13,505 | 11.8 | 11,680 | 29.3 |
| Total stockholders' equity and liabilities | 56,475 | 53,185 | 6.2 | 51,268 | 10.2 |
| 1st Half | ||
|---|---|---|
| 2010 | 2009 | |
| Net income | 2,212 | 718 |
| Depreciation and amortization of intangible assets, property, plant and equipment and financial assets | 1,581 | 1,480 |
| Changes in net working capital | (1,355) | 1,523 |
| Miscellaneous items | 283 | (74) |
| Cash provided by operating activities | 2,721 | 3,647 |
| Payments related to property, plant and equipment and intangible assets | (889) | (1,298) |
| Acquisitions/divestitures | 17 | (1,501) |
| Financial investments and other items | 273 | (109) |
| Cash used in investing activities | (599) | (2,908) |
| Capital increases/repayments, share repurchases | – | (95) |
| Changes in financial liabilities | (292) | 1,484 |
| Dividends | (1,762) | (1,986) |
| Cash used in financing activities | (2,054) | (597) |
| Net changes in cash and cash equivalents | 68 | 142 |
| Cash and cash equivalents as of beginning of year and other changes | 2,039 | 2,767 |
| Cash and cash equivalents at end of period | 2,107 | 2,909 |
Cash provided by operating activities amounted to €2,721 million in the first half of 2010. In the first quarter in particular, the significant business upturn led to an increase in trade accounts receivable. In the second quarter, however, the increase in net working capital was only moderate.
In the first half of 2010, €599 million were used in investing activities. In the same period of the previous year, which was particularly affected by the acquisition of Ciba, the outflow was €2,908 million. Payments related to property, plant and equipment and intangible assets were again clearly below depreciation and amortization.
Cash used in financing activities amounted to €2,054 million. Dividends of €1,561 million were paid to the shareholders of BASF SE and €201 million to minority shareholders in Group companies. The net outflow for the repayment of financial liabilities was €292 million. This amount includes payments arising from the currency hedging of U.S. dollar-denominated loans that were granted to Group companies to finance the North American business.
As of June 30, 2010, cash and cash equivalents amounted to €2,107 million compared with €1,835 million at the end of 2009. Net debt stood at €13,478 million at the end of the second quarter.
| 1st Half | |||
|---|---|---|---|
| 2010 | 2009 | ||
| Income before minority interests | 2,490 | 808 | |
| Actuarial gains/losses from pensions and other obligations; asset ceiling | (1,009) | 197 | |
| Foreign currency translation adjustment | 1,201 | 12 | |
| Fair value changes in available-for-sale securities | (41) | (10) | |
| Cash flow hedges | (13) | 159 | |
| Hedges of net investments in foreign operations | (20) | – | |
| Revaluation due to acquisition of majority of shares | (1) | (1) | |
| Deferred taxes | 292 | (56) | |
| Minority interests | 93 | 26 | |
| Total income and expense recognized in equity | 502 | 327 | |
| Total income and expense for the period | 2,992 | 1,135 | |
| Thereof BASF | 2,621 | 1,019 | |
| Thereof minority interests | 371 | 116 |
| Retained earnings |
Other comprehensive income | Total income and expense recognized directly in equity |
||||||
|---|---|---|---|---|---|---|---|---|
| Actuarial gains/ losses; asset ceiling |
Foreign currency translation adjustment |
Fair value changes in available-for sale securities |
Cash flow hedges |
Hedges of net investments in foreign operations |
Revalua tion due to acquisition of majority of shares |
Total of other comprehen sive income |
||
| As of January 1, 2010 |
(1,425) | (555) | 698 | 5 | – | 8 | 156 | (1,269) |
| Additions | – | 1,201 | – | – | – | – | 1,201 | 1,201 |
| Releases | (1,009) | – | (41) | (13) | (20) | (1) | (75) | (1,084) |
| Deferred taxes | 300 | (17) | 1 | 8 | – | – | (8) | 292 |
| As of June 30, 2010 | (2,134) | 629 | 658 | – | (20) | 7 | 1,274 | (860) |
| As of January 1, 2009 |
(1,511) | (637) | 668 | (137) | – | 10 | (96) | (1,607) |
| Additions | 197 | 12 | – | 159 | – | – | 171 | 368 |
| Releases | – | – | (10) | – | – | (1) | (11) | (11) |
| Deferred taxes | – | (1) | (55) | – | – | (56) | (56) | |
| As of June 30, 2009 | (1,314) | (625) | 657 | (33) | – | 9 | 8 | (1,306) |
| Number of subscribed shares out standing |
Subscribed capital |
Capital surplus |
Retained earnings |
Other com prehensive income1 |
Equity of sharehol ders of BASF SE |
Minority interests |
Stockhol ders' equity |
|
|---|---|---|---|---|---|---|---|---|
| As of January 1, 2010 | 918,478,694 | 1,176 | 3,229 | 12,916 | 156 | 17,477 | 1,132 | 18,609 |
| Dividends paid | – | – | – | (1,561) | – | (1,561) | (201)2 | (1,762) |
| Net income | – | – | – | 2,212 | – | 2,212 | 278 | 2,490 |
| Change in income and expense recognized directly in equity |
– | – | – | (709) | 1,118 | 409 | 93 | 502 |
| Changes in scope of consolidation and other changes |
– | – | – | 8 | – | 8 | 3 | 11 |
| As of June 30, 2010 | 918,478,694 | 1,176 | 3,229 | 12,866 | 1,274 | 18,545 | 1,305 | 19,850 |
| 1st Half 2009 (million €) | ||||||||
| As of January 1, 2009 | 918,478,694 | 1,176 | 3,241 | 13,250 | (96) | 17,571 | 1,151 | 18,722 |
| Share buyback and cancellation of own shares including own shares intended to be cancelled |
– | – | 6 | (6) | – | – | – | – |
| Effect of acquisitions achieved in stages |
– | – | – | (35) | – | (35) | – | (35) |
| Dividends paid | – | – | – | (1,791) | – | (1,791) | (195)2 | (1,986) |
| Net income | – | – | – | 718 | – | 718 | 90 | 808 |
recognized directly in equity – – – 197 104 301 26 327
and other changes – – (1) (2) – (3) 27 24 As of June 30, 2009 918,478,694 1,176 3,246 12,331 8 16,761 1,099 17,860
1 Details are provided in the "Consolidated Statements of Recognized Income and Expense" on page 19.
2 Including profit and loss transfers
Change in income and expense
Changes in scope of consolidation
| Sales | EBITDA | Income from operations (EBIT) before special items |
Income from operations | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2010 | 2009 | Change in % |
2010 | 2009 | Change in % |
2010 | 2009 | Change in % |
2010 | 2009 | Change in % |
|
| Chemicals | 2,970 | 1,809 | 64.2 | 859 | 419 | 105.0 | 687 | 258 | 166.3 | 687 | 258 | 166.3 |
| Plastics | 2,584 | 1,750 | 47.7 | 461 | 247 | 86.6 | 349 | 138 | 152.9 | 350 | 139 | 151.8 |
| Performance Products | 3,151 | 2,443 | 29.0 | 633 | 6 | 471 | 80 | 488.8 | 450 | (214) | ||
| Functional Solutions | 2,453 | 1,755 | 39.8 | 266 | 129 | 106.2 | 165 | 48 | 243.8 | 164 | 29 | 465.5 |
| Agricultural Solutions | 1,211 | 1,175 | 3.1 | 370 | 415 | (10.8) | 320 | 367 | (12.8) | 320 | 366 | (12.6) |
| Oil & Gas | 2,374 | 2,452 | (3.2) | 642 | 625 | 2.7 | 515 | 506 | 1.8 | 515 | 506 | 1.8 |
| Other | 1,471 | 1,118 | 31.6 | (364) | (265) | (37.4) | (301) | (257) | (17.1) | (407) | (312) | (30.4) |
| 16,214 | 12,502 | 29.7 | 2,867 | 1,576 | 81.9 | 2,206 | 1,140 | 93.5 | 2,079 | 772 | 169.3 |
| Research expenses | Assets | Additions to long-term assets1 |
Amortization and depreciation2 |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2010 | 2009 | Change in % |
2010 | 2009 | Change in % |
2010 | 2009 | Change in % |
2010 | 2009 | Change in % |
|
| Chemicals | 31 | 32 | (3.1) | 6,635 | 5,817 | 14.1 | 115 | 111 | 3.6 | 172 | 161 | 6.8 |
| Plastics | 37 | 32 | 15.6 | 5,383 | 4,522 | 19.0 | 55 | 64 | (14.1) | 111 | 108 | 2.8 |
| Performance Products | 72 | 77 | (6.5) | 10,318 | 10,131 | 1.8 | 68 | 3,779 | (98.2) | 183 | 220 | (16.8) |
| Functional Solutions | 47 | 42 | 11.9 | 9,491 | 8,227 | 15.4 | 40 | 40 | – | 102 | 100 | 2.0 |
| Agricultural Solutions | 102 | 86 | 18.6 | 5,478 | 5,118 | 7.0 | 25 | 66 | (62.1) | 50 | 49 | 2.0 |
| Oil & Gas | 4 | 3 | 33.3 | 8,244 | 7,979 | 3.3 | 169 | 270 | (37.4) | 127 | 119 | 6.7 |
| Other | 83 | 80 | 3.8 | 10,926 | 11,391 | (4.1) | 22 | 60 | (63.3) | 43 | 47 | (8.5) |
| 376 | 352 | 6.8 | 56,475 | 53,185 | 6.2 | 494 | 4,390 | (88.7) | 788 | 804 | (2.0) |
1 Investment in intangible assets and property, plant and equipment
2 Depreciation and amortization of intangible assets and property, plant and equipment
| Sales | EBITDA | Income from operations (EBIT) before special items |
Income from operations (EBIT) 2010 2009 1,148 341 627 109 |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2010 | 2009 | Change in % |
2010 | 2009 | Change in % |
2010 | 2009 | Change in % |
Change in % |
|||
| Chemicals | 5,558 | 3,365 | 65.2 | 1,485 | 657 | 126.0 | 1,148 | 342 | 235.7 | 236.7 | ||
| Plastics | 4,781 | 3,213 | 48.8 | 842 | 325 | 159.1 | 628 | 109 | 476.2 | 475.2 | ||
| Performance Products | 6,022 | 4,120 | 46.2 | 1,171 | 222 | 427.5 | 890 | 203 | 338.4 | 791 | (91) | |
| Functional Solutions | 4,543 | 3,323 | 36.7 | 468 | 176 | 165.9 | 276 | 2 | 275 | (16) | ||
| Agricultural Solutions | 2,356 | 2,320 | 1.6 | 739 | 803 | (8.0) | 641 | 711 | (9.8) | 641 | 706 | (9.2) |
| Oil & Gas | 5,599 | 6,346 | (11.8) | 1,409 | 1,464 | (3.8) | 1,144 | 1,231 | (7.1) | 1,144 | 1,231 | (7.1) |
| Other | 2,809 | 2,034 | 38.1 | (620) | (484) | (28.1) | (567) | (473) | (19.9) | (707) | (580) | (21.9) |
| 31,668 | 24,721 | 28.1 | 5,494 | 3,163 | 73.7 | 4,160 | 2,125 | 95.8 | 3,919 | 1,700 | 130.5 |
| Research expenses | Assets | Additions to long-term assets1 |
Amortization and depreciation2 |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2010 | 2009 | Change in % |
2010 | 2009 | Change in % |
2010 | 2009 | Change in % |
2010 | 2009 | Change in % |
||
| Chemicals | 62 | 66 | (6.1) | 6,635 | 5,817 | 14.1 | 202 | 213 | (5.2) | 337 | 316 | 6.6 | |
| Plastics | 72 | 64 | 12.5 | 5,383 | 4,522 | 19.0 | 96 | 127 | (24.4) | 215 | 216 | (0.5) | |
| Performance Products | 146 | 126 | 15.9 | 10,318 | 10,131 | 1.8 | 115 | 3,853 | (97.0) | 380 | 313 | 21.4 | |
| Functional Solutions | 85 | 86 | (1.2) | 9,491 | 8,227 | 15.4 | 68 | 76 | (10.5) | 193 | 192 | 0.5 | |
| Agricultural Solutions | 186 | 167 | 11.4 | 5,478 | 5,118 | 7.0 | 51 | 111 | (54.1) | 98 | 97 | 1.0 | |
| Oil & Gas | 5 | 5 | – | 8,244 | 7,979 | 3.3 | 303 | 462 | (34.4) | 265 | 233 | 13.7 | |
| Other | 170 | 163 | 4.3 | 10,926 | 11,391 | (4.1) | 39 | 73 | (46.6) | 87 | 96 | (9.4) | |
| 726 | 677 | 7.2 | 56,475 | 53,185 | 6.2 | 874 | 4,915 | (82.2) | 1,575 | 1,463 | 7.7 |
1 Investments in intangible assets and property, plant and equipment
2 Depreciation and amortization of intangible assets and property, plant and equipment
| 2nd Quarter | 1st Half | ||||||
|---|---|---|---|---|---|---|---|
| 2010 | 2009 | Change in % | 2010 | 2009 | Change in % | ||
| Sales | 1,471 | 1,118 | 31.6 | 2,809 | 2,034 | 38.1 | |
| Thereof Styrenics | 937 | 604 | 55.1 | 1,729 | 1,121 | 54.2 | |
| Thereof Other business included under Other | 534 | 514 | 3.9 | 1,080 | 913 | 18.3 | |
| EBIT before special items | (301) | (257) | (17.1) | (567) | (473) | (19.9) | |
| Thereof Group corporate costs | (55) | (56) | 1.8 | (106) | (110) | 3.6 | |
| Corporate research | (78) | (78) | – | (160) | (159) | (0.6) | |
| Currency results, hedges and other valuation effects | (198) | (236) | 16.1 | (334) | (429) | 22.1 | |
| Styrenics, fertilizers, other business | 67 | 107 | (37.4) | 168 | 216 | (22.2) | |
| Special items | (106) | (55) | (92.7) | (140) | (107) | (30.8) | |
| EBIT | (407) | (312) | (30.4) | (707) | (580) | (21.9) |
3 Further information about Other can be found in the Notes on pages 24 and 25.
The Consolidated Financial Statements of the BASF Group for the year ending December 31, 2009 were prepared according to the International Financial Reporting Standards (IFRS) valid as of the balance sheet date. The Interim Financial Statements as of June 30, 2010 have been prepared in line with the rules of International Accounting Standard 34 in abbreviated form and using the same accounting policies. The Interim Financial Statements and Interim Management's Analysis have been neither audited nor subject to an auditor's review.
The BASF Report 2009 containing the Consolidated Financial Statements as of December 31, 2009 can be found on the Internet at basf.com/report
The appreciation of important currencies against the euro since December 31, 2009 led to a balance sheet expansion of around €3.8 billion. Shareholders' equity increased by €1,184 million due to exchange rate effects.
| Closing rates | 1st half | Average rates | ||
|---|---|---|---|---|
| €1 equals | June 30, 2010 |
Dec. 31, 2009 |
Current year |
Previous year |
| Argentina (ARS) | 4.82 | 5.46 | 5.14 | 4.85 |
| Brazil (BRL) | 2.21 | 2.51 | 2.38 | 2.92 |
| China (CNY) | 8.32 | 9.84 | 9.06 | 9.10 |
| Great Britain (GBP) | 0.82 | 0.89 | 0.87 | 0.89 |
| Japan (JPY) | 108.79 | 133.16 | 121.32 | 127.20 |
| Malaysia (MYR) | 3.97 | 4.93 | 4.39 | 4.78 |
| Mexico (MXN) | 15.74 | 18.92 | 16.81 | 18.43 |
| The Russian Federation (RUB) |
38.28 | 43.15 | 39.89 | 44.10 |
| South Korea (KRW) | 1,499.59 | 1,666.97 | 1,531.21 | 1,796.58 |
| United States (USD) | 1.23 | 1.44 | 1.33 | 1.33 |
The Consolidated Financial Statements include BASF SE as well as all material subsidiaries on a fully consolidated basis. Material jointly operated companies are proportionally consolidated. The development of the number of fully and proportionally consolidated companies is shown in the table.
There have been four first-time consolidations since the beginning of 2010 due to the increasing importance of these companies.
Since the beginning of 2010, 35 companies have been deconsolidated as a result of mergers with other BASF companies, sale to third parties or decreased significance. These restructuring measures were primarily a consequence of the Ciba integration.
| 2010 | 2009 | |
|---|---|---|
| As of January 1 | 345 | 293 |
| Thereof proportionally consolidated | 19 | 19 |
| First-time consolidations | 4 | 72 |
| Thereof proportionally consolidated | 1 | – |
| Deconsolidations | 35 | 9 |
| Thereof proportionally consolidated | – | – |
| As of June 30 | 314 | 356 |
| Thereof proportionally consolidated | 20 | 19 |
On June 23, BASF reached an agreement with the owners of Cognis to acquire the specialty chemicals company based in Monheim. The equity purchase price is €700 million, including net financial debt and pension obligations the enterprise value of the transaction is €3.1 billion. The acquisition is still subject to approval by the competent authorities. The transaction is expected to close in November 2010.
Furthermore, BASF signed an agreement on June 7 to divest its business with hydrophilic melt additives, marketed under the brand name Irgasurf® HL, to Techmer PM, based in Tennessee. In the first quarter, BASF divested major parts of the Ciba Expert Services business to Intertek Group plc. The divested business offers regulatory environmental, safety and materials testing services for customers in several industries. BASF also sold its businesses with the pigments bismuthvanadate and indanthrone blue to the Dominion Colour Corporation. Apart from these transactions, BASF did not make any material acquisitions or divestitures in the first half of 2010.
BASF's worldwide business is managed by operating divisions that are aggregated into six segments for reporting purposes.
Chemicals consists of the Inorganics, Petrochemicals and Intermediates divisions. Its portfolio ranges from basic chemicals, glues and electronic chemicals to solvents and plasticizers, as well as starting materials for products such as detergents, plastics, textile fibers, paints and coatings and pharmaceuticals.
Plastics is composed of the Performance Polymers and Polyurethanes divisions.
Performance Products, which is made up of the Dispersions & Pigments, Care Chemicals, Paper Chemicals and Performance Chemicals operating divisions, primarily offers customer-specific specialties alongside standard products.
Functional Solutions comprises the Catalysts, Construction Chemicals and Coatings divisions.
Agricultural Solutions contains the Crop Protection division.
Oil & Gas is composed of the Oil & Gas division with the Exploration & Production and Natural Gas Trading business sectors.
Activities not allocated to a particular division are reported under Other and include, in particular, Styrenics as well as our fertilizer activities. In addition, the sale of raw materials, engineering and other services, rental income and leases are reported under Other. Group corporate costs consist of the expenses for steering the BASF Group; these costs are not allocated to the segments, they are reported under Other.
With our cross-divisional corporate research, which is also reported under Other, we develop growth clusters and ensure the long-term competence of BASF with regard to technology and methods.
Earnings from currency conversion that are not allocated to the segments are reported under Other as are earnings from the hedging of raw materials prices and foreign currency exchange risks. Expenses and revenues from the BASF option program are also reported under Other.
In the first half of 2010, sales in Other increased significantly compared with the same period of 2009. This was mainly due to the positive business development in Styrenics. Earnings in the Styrenics business also increased substantially. Provisions for the BASF option program had a negative impact on earnings because the BASF share outperformed the benchmark index MSCI World Chemicals in the first half of 2010.
Transfers between the segments are almost always executed at market-based prices. The allocation of assets and depreciation to the segments is based on economic control. Assets used by more than one segment are allocated based on the percentage of usage.
| 1st Half | ||
|---|---|---|
| 2010 | 2009 | |
| Assets of business included under Other | 2,544 | 2,434 |
| Financial assets | 2,840 | 2,855 |
| Deferred tax assets | 1,192 | 1,035 |
| Cash and cash equivalents, marketable securities | 2,125 | 3,026 |
| Defined benefit assets | 138 | 328 |
| Miscellaneous receivables/prepaid expenses | 2,087 | 1,713 |
| 10,926 | 11,391 | |
| 1st Half | |||
|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 |
| 515 | 506 | 1,144 | 1,231 |
| 44 | 73 | 109 | 24 |
| (20) | (94) | (28) | (211) |
| 539 | 485 | 1,225 | 1,044 |
| 344 | 317 | 689 | 590 |
| 209 | 226 | 436 | 380 |
| 195 | 168 | 536 | 454 |
| 47 | (13) | 115 | 60 |
| 148 | 181 | 421 | 394 |
| 2nd Quarter |
In the reconciliation reporting for Oil & Gas, the income from operations of the Oil & Gas segment is reconciled to the contribution of the companies in this segment to the net income of the BASF Group.
Other income includes all expenses and income not included in income from operations of the segment, the interest result and the miscellaneous financial result.
The increase in income from participations in the first half resulted chiefly from foreign currency gains on loans at OAO Severneftegazprom (which is accounted for using the equity method). The increase in Other income resulted mainly from transactions to hedge foreign currency risks not assigned to the Oil & Gas segment; these transactions are reported under Other.
| 2nd Quarter | 1st Half | |||
|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | |
| Income from currency conversion and foreign currency transactions | 113 | (5) | 197 | 99 |
| Disposal of property, plant and equipment | 32 | 15 | 41 | 22 |
| Reversal/usage of provisions | 6 | (32) | 7 | 9 |
| Reversal of allowances for doubtful receivables | 20 | 22 | 40 | 33 |
| Revenue from miscellaneous typical business activities | 10 | 20 | 16 | 34 |
| Miscellaneous | 102 | 103 | 201 | 346 |
| Other operating income | 283 | 123 | 502 | 543 |
| 2nd Quarter | 1st Half | |||||
|---|---|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | |||
| Losses from currency conversion and foreign currency transactions | 148 | 79 | 258 | 378 | ||
| Oil and gas exploration expenses | 41 | 31 | 88 | 51 | ||
| Miscellaneous | 590 | 679 | 1,118 | 1,077 | ||
| Other operating expenses | 779 | 789 | 1,464 | 1,506 |
In the second quarter of 2010, income from currency conversion and foreign currency transactions was mainly a result of the appreciation of the U.S. dollar. Losses from currency conversion and foreign currency transactions were primarily a result of the appreciation of the U.S. dollar and the Russian ruble. The decrease in income from Miscellaneous in the first half of 2010 resulted primarily from lower income from hedging for raw materials price risks.
Expenses for the BASF option program were incurred in the second quarter of 2010 because the BASF share outperformed the benchmark index MSCI World Chemicals.
Furthermore, provisions were also recognized in Miscellaneous for other personnel obligations, for credit risks from trade accounts receivable and for planned restructuring measures. In the second quarter of 2009, special charges of €375 million were incurred, mainly related to the Ciba acquisition.
| Million € | 2nd Quarter | 1st Half | |||
|---|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | ||
| Income from companies accounted for using the equity method | 38 | 60 | 104 | 16 | |
| Income from participations in affiliated and associated companies | 30 | 67 | 31 | 68 | |
| Income from profit transfer agreements | 8 | 2 | 18 | 4 | |
| Income from tax allocation to participating interests | 1 | – | 2 | 1 | |
| Other income from participations | 39 | 69 | 51 | 73 | |
| Losses from loss transfer agreements | (1) | (1) | (2) | (1) | |
| Write-downs of/losses from the sale of participations | (6) | (2) | (7) | (3) | |
| Other expenses from participations | (7) | (3) | (9) | (4) | |
| Interest income from cash and cash equivalents | 22 | 30 | 42 | 44 | |
| Interest and dividend income from securities and loans | 7 | 7 | 15 | 14 | |
| Interest income | 29 | 37 | 57 | 58 | |
| Interest expense | (195) | (201) | (373) | (339) | |
| Write-ups/profits from the sale of securities and loans | – | 16 | – | 16 | |
| Expected income from plan assets to cover pensions and similar obligations | 197 | 174 | 384 | 322 | |
| Income from plan assets to cover other long-term personnel obligations | (1) | (2) | 4 | 6 | |
| Income from construction interest | 15 | 15 | 30 | 28 | |
| Miscellaneous financial income | 15 | – | 24 | – | |
| Other financial income | 226 | 203 | 442 | 372 | |
| Write-downs/losses from the disposal of securities and loans | – | (9) | – | (10) | |
| Interest accrued on pension obligations and other similar obligations | (207) | (195) | (406) | (361) | |
| Expenses from other long-term employee obligations | (5) | (6) | (17) | (20) | |
| Interest accrued on other long-term liabilities | (11) | (11) | (22) | (21) | |
| Miscellaneous financial expenses | – | (3) | – | (25) | |
| Other financial expenses | (223) | (224) | (445) | (437) | |
| Financial result | (93) | (59) | (173) | (261) |
Income from companies accounted for using the equity method grew in the first half of 2010 due to currency-related gains on loans at OAO Severneftegazprom. In the previous year, on the other hand, there were currency losses as a consequence of the depreciation of the Russian ruble.
Interest income and expenses relate to expenses and income from interest-bearing liabilities and financial investments, including dividend income on securities. In addition, these items take into account the ongoing interest expenses and income from interest rate and currency swaps with banks. The interest result was lower in comparison with the previous year. This is attributable to the higher interest expense for bonds issued in 2009.
The higher level of expected income from pension plan assets can be attributed to the increase in pension plan assets compared with the previous year.
Additional pension obligations occurred due to the acquisition of Ciba in April 2009. As a result, expenses for interest accrued on pension obligations and similar obligations increased compared with the first half of 2009.
Income before taxes and minority interests (million €)
| 2nd Quarter | 1st Half | |||
|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | |
| Germany | 613 | 91 | 1,145 | 116 |
| Foreign oil production branches of German companies | 268 | 298 | 556 | 495 |
| Other foreign | 1,105 | 324 | 2,045 | 828 |
| 1,986 | 713 | 3,746 | 1,439 |
| 2nd Quarter | 1st Half | |||
|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | |
| Germany | 245 | 20 | 376 | 45 |
| Foreign oil production branches of German companies | 248 | 270 | 518 | 453 |
| Thereof non-compensable | 209 | 226 | 436 | 380 |
| Other foreign | 152 | 72 | 362 | 133 |
| 645 | 362 | 1,256 | 631 | |
| Tax rate (%) | 32.5 | 50.8 | 33.5 | 43.8 |
The lower contribution to earnings from the highly taxed Oil & Gas segment led to a reduction in the tax rate.
| Million € | 2nd Quarter | 1st Half | |||
|---|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | ||
| Minority interests in profits | 154 | 19 | 282 | 106 | |
| Minority interests in losses | 4 | (11) | (4) | (16) | |
| 158 | 8 | 278 | 90 |
Minority interests in profits resulted primarily from natural gas trading companies as well as Gazprom's stake in the Wintershall subsidiary that holds production and exploration rights in Libya. In particular, the companies BASF PETRONAS
Chemicals Sdn. Bhd., based in Malaysia, Shanghai BASF Polyurethane Co. Ltd., China, and BASF FINA Petrochemicals Ltd. Partnership, United States, contributed to higher minority interests in profits than in the previous year.
| 2nd Quarter | 1st Half | ||||
|---|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | ||
| Net income | million € | 1,183 | 343 | 2,212 | 718 |
| Number of outstanding shares (weighted average) | (in thousands) | 918,479 | 918,479 | 918,479 | 918,479 |
| Earnings per share | € | 1.29 | 0.37 | 2.41 | 0.78 |
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 2010, and in the corresponding period of 2009, there was no dilutive effect; undiluted earnings per share were the same as the diluted value per share.
| 1st Half 2010 | |||||
|---|---|---|---|---|---|
| Intangible assets |
Property, plant and equipment |
Investments accounted for using the equity method and other financial assets |
|||
| Acquisition costs | |||||
| Balance as of January 1 | 13,303 | 51,943 | 3,220 | ||
| Additions | 19 | 855 | 157 | ||
| Disposals | (217) | (195) | (189) | ||
| Transfers | 38 | 151 | (152) | ||
| Exchange differences | 1,032 | 2,510 | 63 | ||
| Balance as of June 30 | 14,175 | 55,264 | 3,099 | ||
| Amortization and depreciation | |||||
| Balance as of January 1 | 2,854 | 35,658 | 261 | ||
| Additions | 306 | 1,269 | 6 | ||
| Disposals | (210) | (155) | (9) | ||
| Transfers | (69) | 95 | – | ||
| Exchange differences | 177 | 1,471 | 1 | ||
| Balance as of June 30 | 3,058 | 38,338 | 259 | ||
| Net book value as of June 30 | 11,117 | 16,926 | 2,840 | ||
| 1st Half 2009 | ||||
|---|---|---|---|---|
| Intangible assets |
Property, plant and equipment |
Investments accounted for using the equity method and other financial assets |
||
| Acquisition costs | ||||
| Balance as of January 1 | 12,408 | 49,147 | 3,424 | |
| Additions | 1,703 | 3,212 | 299 | |
| Disposals | (330) | (350) | (112) | |
| Transfers | (54) | 53 | (452) | |
| Exchange differences | (94) | (133) | (22) | |
| Balance as of June 30 | 13,633 | 51,929 | 3,137 | |
| Amortization and depreciation | ||||
| Balance as of January 1 | 2,519 | 34,115 | 331 | |
| Additions | 335 | 1,128 | 17 | |
| Disposals | (330) | (315) | (66) | |
| Transfers | 1 | 18 | – | |
| Exchange differences | 2 | (82) | – | |
| Balance as of June 30 | 2,527 | 34,864 | 282 | |
| Net book value as of June 30 | 11,106 | 17,065 | 2,855 |
Additions to property, plant and equipment from January to June 2010 arose from a number of investments. The most significant investments in the first half of 2010 were the expansion of the synthesis gas plants in Ludwigshafen, the construction of natural gas pipelines in Europe and a polyol plant and methylamines plant in Geismar, Louisiana.
The increase in amortization and depreciation is primarily a result of long-term assets taken over as part of the Ciba acquisition.
| June 30, 2010 | June 30, 2009 | Dec. 31, 2009 | |
|---|---|---|---|
| Raw materials and factory supplies | 2,172 | 1,741 | 1,845 |
| Work-in-process, finished goods and merchandise | 5,614 | 4,460 | 4,860 |
| Advance payments and services-in-process | 104 | 98 | 71 |
| Inventories | 7,890 | 6,299 | 6,776 |
| Accounts receivables, trade | 10,181 | 8,106 | 7,738 |
| Other receivables and miscellaneous short-term assets | 3,598 | 2,851 | 3,223 |
| Marketable securities | 18 | 117 | 15 |
| Cash and cash equivalents | 2,107 | 2,909 | 1,835 |
| Other short-term assets | 5,723 | 5,877 | 5,073 |
| Short-term assets | 23,794 | 20,282 | 19,587 |
Work-in-process and finished goods and merchandise are combined into one item due to the production conditions in the chemical industry. Uncompleted contracts relate primarily to services not invoiced at the balance sheet date. Inventories are valued using the weighted average cost method.
The increase in inventories compared with year-end 2009 is in part attributable to translation effects amounting to €510 million.
Trade accounts receivable increased in comparison with year-end 2009 as a result of currency effects of €692 million as well as the expansion of business activities in response to the seasonal and economic upswing.
At the Annual Meeting of April 30, 2009, shareholders authorized the Board of Executive Directors to increase subscribed capital by issuing new shares in an amount of up to €500 million against cash with the approval of the Supervisory Board through April 30, 2014. The Board of Executive Directors is empowered, following the approval of the Supervisory Board, to decide on the exclusion of shareholders' subscription rights for these new shares. Until now, this option has not been exercised and no new shares were issued.
Transfers to Other retained earnings increased legal reserves by €10 million in the first half of 2010. The offsetting of actuarial gains and losses, as well as the asset ceiling, resulted in a reduction in retained earnings of €709 million in the first half of 2010, and an increase of €197 million in the first half of 2009.
The Annual Meeting of BASF SE decided on April 29, 2010 to distribute a dividend of €1,561 million for 2009 to shareholders, corresponding to €1.70 per share.
| June 30, 2010 |
Dec. 31, 2009 |
|
|---|---|---|
| Legal reserves | 432 | 429 |
| Other retained earnings | 12,434 | 12,487 |
| 12,866 | 12,916 |
Assumptions used to determine the defined benefit obligation (weighted average in %)
| Germany | Foreign | ||||
|---|---|---|---|---|---|
| June 30, 2010 | Dec. 31, 2009 | June 30, 2010 | Dec. 31, 2009 | ||
| Discount rate | 4.75 | 5.50 | 4.67 | 5.17 | |
| Projected increase of wages and salaries | 2.75 | 2.75 | 3.91 | 3.91 | |
| Projected pension increase | 2.00 | 2.00 | 0.92 | 0.92 |
| Germany | Foreign | |||
|---|---|---|---|---|
| June 30, 2010 | Dec. 31, 2009 | June 30, 2010 | Dec. 31, 2009 | |
| Discount rate | 5.50 | 6.00 | 5.17 | 5.59 |
| Projected increase of wages and salaries | 2.75 | 2.75 | 3.91 | 3.82 |
| Projected pension increase | 2.00 | 2.00 | 0.92 | 0.76 |
| Expected return on plan assets | 5.13 | 5.42 | 6.28 | 6.60 |
The assumptions regarding the overall expected long-term rate of return are based on the target asset allocation and the weighted average rate of expected returns of each individual asset class. 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 2010, developments in the capital markets led to a reduction of the average weighted discount rate for existing pension obligations. In particular, the resulting actuarial losses of €1,356 million led to an increase in pension provisions in the first half of 2010.
| Million € | June 30, 2010 | June 30, 2009 | Dec. 31, 2009 |
|---|---|---|---|
| Other long-term provisions | 3,552 | 3,166 | 3,289 |
| Short-term provisions | 3,178 | 2,935 | 3,276 |
| 6,730 | 6,101 | 6,565 |
In the first half of 2010, other provisions increased compared with the end of 2009. This increase primarily affects provisions for the BASF option program.
| June 30, 2010 | June 30, 2009 | Dec. 31, 2009 | ||||||
|---|---|---|---|---|---|---|---|---|
| Short-term | Long-term | Short-term | Long-term | Short-term | Long-term | |||
| Accounts payable, trade | 4,334 | – | 2,976 | – | 2,786 | – | ||
| Bonds and other liabilities to the capital market | 3,366 | 10,322 | 3,479 | 11,934 | 1,491 | 11,351 | ||
| Liabilities to credit institutions | 514 | 1,383 | 584 | 1,190 | 884 | 1,093 | ||
| Financial indebtedness | 3,880 | 11,705 | 4,063 | 13,124 | 2,375 | 12,444 | ||
| Tax liabilities | 1,198 | – | 958 | – | 1,003 | – | ||
| Advances received on orders | 61 | – | 55 | – | 116 | – | ||
| Liabilities on bills | 40 | 27 | 77 | 24 | 52 | 23 | ||
| Liabilities related to social security | 151 | 34 | 169 | 13 | 156 | 30 | ||
| Miscellaneous liabilities | 2,008 | 681 | 2,050 | 857 | 1,801 | 663 | ||
| Deferred income | 250 | 198 | 222 | 166 | 115 | 182 | ||
| Other liabilities | 2,510 | 940 | 2,573 | 1,060 | 2,240 | 898 |
| Carrying amounts based on effective interest method |
|||||
|---|---|---|---|---|---|
| Nominal value |
Effective interest rate |
June 30, 2010 |
Dec. 31, 2009 |
June 30, 2009 |
|
| 3.5% Euro Bond 2003/2010 of BASF SE | 1,000 | 3.63% | 1,000 | 999 | 999 |
| 4% Euro Bond 2006/2011 of BASF SE | 1,000 | 4.05% | 1,000 | 999 | 999 |
| 3.375% Euro Bond 2005/2012 of BASF SE | 1,400 | 3.42% | 1,399 | 1,399 | 1,398 |
| 3.75% Euro Bond 2009/2012 of BASF SE | 1,350 | 3.97% | 1,344 | 1,343 | 1,341 |
| 4.5% Euro Bond 2006/2016 of BASF SE | 500 | 4.62% | 497 | 497 | 497 |
| 4.25% Euro Bond 2009/2016 of BASF SE | 200 | 4.40% | 198 | 198 | – |
| 5.875% GBP Bond 2009/2017 of BASF SE | 400 | 6.04% | 485 | 446 | 465 |
| 4.625% Euro Bond 2009/2017 of BASF SE | 300 | 4.69% | 299 | 299 | – |
| 3.25% CHF Bond 2008/2011 of BASF Finance Europe N.V. | 300 | 3.39% | 226 | 202 | 196 |
| 6% Euro Bond 2008/2013 of BASF Finance Europe N.V. | 1,250 | 6.15% | 1,244 | 1,244 | 1,243 |
| 5% Euro Bond 2007/2014 of BASF Finance Europe N.V. | 1,000 | 5.09% | 997 | 996 | 996 |
| 5% Euro Bond 2007/2014 of BASF Finance Europe N.V. | 250 | 4.83% | 251 | 252 | 252 |
| 3.625% CHF Bond 2008/2015 of BASF Finance Europe N.V. | 200 | 3.77% | 150 | 134 | 130 |
| 5.125% Euro Bond 2009/2015 of BASF Finance Europe N.V. | 1,500 | 5.30% | 1,489 | 1,488 | 1,487 |
| 5.125% Euro Bond 2009/2015 of BASF Finance Europe N.V. | 500 | 4.38% | 516 | 517 | 519 |
| 4.5% Euro Medium Term Note 2009/2016 of BASF Finance Europe N.V. | 150 | 4.56% | 150 | 149 | 149 |
| USD Extendible Floating Rate Notes of BASF Finance Europe N.V. | 0.33% | 3 | 3 | 314 | |
| 3.25% CHF Bond 2006/2012 of Ciba Spezial. Finanz AG | 225 | 3.32% | 165 | 147 | 151 |
| 4.875% Euro Bond 2003/2018 of Ciba Special. Chem. Finance Luxembourg S.A. | 477 | 4.88% | 397 | 393 | 506 |
| USD Commercial Paper | 1,381 | 1,125 | 487 | 3,150 | |
| Other bonds | 753 | 650 | 621 | ||
| Bonds and other liabilities to the capital market | 13,688 | 12,842 | 15,413 | ||
| Liabilities to credit institutions | 1,897 | 1,977 | 1,774 | ||
| 15,585 | 14,819 | 17,187 |
Material supply relationships exist for the supply of oil and gas between companies of the BASF Group and the proportionally consolidated joint venture companies Wintershall Erdgas Handelshaus GmbH & Co. KG, Berlin, and Wintershall Erdgas Handelshaus Zug AG, Zug, Switzerland. These transactions are conducted at arm's length prices and business terms. The unconsolidated portion of these supplies amounted to €513 million in the first half of 2010, and €383 million in the same period of 2009.
In addition, there are material supply relationships with Ellba C.V., Rotterdam, Netherlands, and Ellba Eastern Private Ltd., Singapore. The unconsolidated portion of these supplies amounted to €237 million in the first half of 2010, and €109 million in the same period of 2009.
There were no reportable related party transactions with members of the Board of Executive Directors or the Supervisory Board. BASF has not issued loans to members of the Board of Executive Directors or the Supervisory Board.
| Million € | 2nd Quarter | 1st Half | |||
|---|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | ||
| Income before taxes and minority interests | 1,986 | 713 | 3,746 | 1,439 | |
| Special items | 127 | 368 | 241 | 425 | |
| Amortization of intangible assets | 154 | 205 | 306 | 335 | |
| Amortization of intangible assets contained in the special items | – | (59) | (5) | (59) | |
| Adjusted income before taxes and minority interests | 2,267 | 1,227 | 4,288 | 2,140 | |
| Adjusted income taxes | 725 | 490 | 1,411 | 812 | |
| Adjusted income before minority interests | 1,542 | 737 | 2,877 | 1,328 | |
| Adjusted minority interests | 161 | 10 | 283 | 94 | |
| Adjusted net income | 1,381 | 727 | 2,594 | 1,234 | |
| Weighted average number of outstanding shares (in thousands) |
918,479 | 918,479 | 918,479 | 918,479 | |
| Adjusted earnings per share € |
1.50 | 0.79 | 2.82 | 1.34 |
The earnings per share figure adjusted for special items and amortization of intangible assets has become internationally established as a key figure that can be compared over the course of time and is particularly suitable for forecasts of future earnings.
The special items are primarily the result of the integration of acquired businesses, restructuring measures, impairment losses and gains or losses resulting from divestitures. This involves expenses and income that do not arise in conjunction with ordinary business activities. Intangible assets primarily result from purchase price allocation following acquisitions. The amortization of intangible assets is therefore of a temporary nature.
The calculation of earnings per share in accordance with IFRS is presented in the Notes on page 28. The adjusted income before taxes and minority interests, the adjusted net income and the adjusted earnings per share are not defined in IFRS. They should not be viewed in isolation, but rather treated as supplementary information.
To the best of our knowledge, and in accordance with the applicable reporting principles for interim financial reporting, the Interim Financial Statements give a true and fair view of the assets, liabilities, financial position and profit situation of the Group, and the Interim Management's Analysis 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 in the remainder of the financial year.
Ludwigshafen, July 26, 2010 BASF SE The Board of Executive Directors
This report contains forward-looking statements. These statements are based on current estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future events that may not prove to be accurate. Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. Such factors include those discussed from pages 103 to 111 in the BASF Report 2009. The BASF Report can be found on the Internet at: basf.com/report. We do not assume any obligation to update the forward-looking statements contained in this report.
Interim Report 3rd Quarter 2010
Oct. 28, 2010
Full Year Results 2010
Annual Meeting 2011 / Interim Report 1st Quarter 2011
Interim Report 1st Half 2011
July 28, 2011
May 6, 2011
Further Information
Published on July 29, 2010
You can find this and other BASF publications
General inquiries Phone: +49 621 60-0, Fax: +49 621 60-42525
Corporate Media Relations Jennifer Moore-Braun, Phone: +49 621 60-99123, 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
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.