29 – Statement of Cash Flows and Capital Structure Management

Statement of cash flows

Cash flows from operating activities contained the following payments:

In 2019, interest payments comprised interest payments received of €175 million (2018: €162 million) and interest paid of €655 million (2018: €555 million).

In the first quarter of 2019, BASF SE transferred securities in the amount of €300 million to BASF Pensionstreuhand e.V., Ludwigshafen am Rhein, Germany. This transfer was not cash effective and therefore had no effect on the statement of cash flows.

Cash flows from investing activities included €239 million in payments made for acquisitions (2018: €7,362 million).

Payments of €2,600 million were received for divestitures in 2019 (2018: €107 million). Of material significance was the merger of the oil and gas businesses of Wintershall and DEA in the second quarter of 2019. The effects of the deconsolidation of the Wintershall companies and the simultaneous recognition of the equity-accounted interest in Wintershall Dea GmbH offset each other. The only effect on cash was the outflow of cash and cash equivalents in the amount of €800 million, as well as the repayment of BASF SE’s open finance-related receivables by the Wintershall Dea group and capital decreases at Wintershall Dea GmbH in the total amount of €3.2 billion. In connection with the transfer of the paper and water chemicals business to the Solenis group in the first quarter of 2019, the majority of the purchase price was settled with the contribution of the interest in Solenis UK International Limited (€590 million). The rest of the purchase price (€178 million) was recognized in cash.

Payments made for intangible assets and property, plant and equipment amounted to €3,824 million, €70 million lower than in the previous year.

Cash and cash equivalents consist primarily of cash on hand and bank balances with maturities of less than three months.

Cash and cash equivalents in the amount of €2,455 million reported in the statement of cash flows as of December 31, 2019, consisted of the balance sheet value (€2,427 million) and the values reclassified to the disposal groups for the construction chemicals business (€21 million) and the pigments business (€7 million). Cash and cash equivalents in the amount of €2,519 million reported in the statement of cash flows as of December 31, 2018, consisted of the balance sheet value (€2,300 million) and the value reclassified to the oil and gas business disposal group (€219 million). As in the previous year, cash and cash equivalents were not subject to any utilization restrictions.

The reconciliation according to IAS 7 breaks down the changes in financial and similar liabilities and their hedging transactions into cash-effective and non-cash-effective changes. The cash-effective changes presented above correspond to the figures in cash flows from financing activities.

Loan liabilities do not contain any interest components.

Only the principal component of lease liabilities is shown in cash flows from financing activities. BASF presents the interest component of lease payments in cash flows from operating activities.

Other financing-related liabilities primarily comprise liabilities from accounts used for cash pooling with BASF companies not included in the Consolidated Financial Statements. They are reported in miscellaneous liabilities within the balance sheet item other liabilities that qualify as financial instruments.

The assets/liabilities from hedging transactions form part of the balance sheet item derivatives with positive or negative fair values and include only those transactions which hedge risks arising from financial indebtedness and financing-related liabilities secured by micro hedges.

Capital structure management

The aim of capital structure management is to maintain the financial flexibility needed to further develop BASF’s business portfolio and take advantage of strategic opportunities. The objectives of the company’s financing policy are to ensure solvency, limit financial risks and optimize the cost of capital.

Capital structure management focuses on meeting the requirements needed to ensure unrestricted access to the capital market and a solid A rating. The capital structure is managed using selected financial ratios, such as dynamic debt ratios, as part of the company’s financial planning.

The equity of the BASF Group as reported in the balance sheet amounted to €42,350 million as of December 31, 2019 (December 31, 2018: €36,109 million); the equity ratio was 48.7% on December 31, 2019 (December 31, 2018: 41.7%).

BASF prefers to access external financing on the capital markets. A commercial paper program is used for short-term financing, while corporate bonds are used for financing in the medium and long term. These are issued in euros and other currencies with different maturities. The goal is to create a balanced maturity profile, achieve a diverse range of investors and optimize our debt capital financing conditions.

BASF currently has the following ratings, which were most recently confirmed by Moody’s on November 4, 2019 and by Standard & Poor’s on November 13, 2019.

The contract with Scope Ratings expired at the beginning of September 2019 and was not extended by BASF.

BASF strives to maintain a solid A rating, which ensures unrestricted access to financial and capital markets.