Net Assets and Financial Position

Net assets

Total assets rose from €86,950 million as of the 2019 year-end to €90,369 million. This was primarily attributable to the increase in current assets.

Noncurrent assets declined by €804 million. The main driver was the €1,265 million decrease in investments accounted for using the equity method to €13,743 million, largely owing to the impairment of the shareholding in Wintershall Dea. This was partially offset by the increase in fixed assets, especially intangible assets, mainly as a result of the integration of the polyamide business acquired from Solvay.

Current assets rose by €4,223 million to €35,213 million, primarily due to higher cash and cash equivalents. Seasonal growth in trade accounts receivable and higher other receivables also contributed to the increase. The decline in inventories had an offsetting effect.

Financial position

Equity declined by €3,969 million compared with December 31, 2019, to €38,381 million, mainly as a result of the dividend payments made in the second quarter of 2020. The equity ratio decreased from 48.7% to 42.5%.

Noncurrent liabilities rose by €2,313 million compared with the 2019 year-end to €30,309 million, primarily due to higher financial indebtedness. This increase was mainly driven by the issue of two eurobonds in the amount of €1 billion each, as well as new bank loans taken out for a total of approximately €800 million. By contrast, the reclassification of a eurobond with a carrying amount of around €1 billion to current financial indebtedness in the first quarter of the current year had an offsetting effect. Tax provisions, deferred taxes, and provisions for pensions and similar obligations also increased. The €141 million increase in other liabilities was largely attributable to higher lease liabilities.

Current liabilities rose by €5,075 million compared with the 2019 year-end to €21,679 million, primarily as a result of higher current financial indebtedness. This was mainly due to the €5.2 billion increase in commercial paper at BASF SE, as well as the above-mentioned reclassification of a bond with a carrying amount of €1 billion. The repayment of a €300 million bond had an offsetting effect. Trade accounts payable declined by €1,267 million.

Net debt¹ rose by €5,013 million compared with December 31, 2019, to €20,519 million. This was mainly due to the significant increase in financial indebtedness, which rose by €7,704 million to €26,081 million. Higher cash and cash equivalents had an offsetting effect.

Cash flows from operating activities amounted to €1,212 million in the first half of 2020, €1,107 million below the figure for the prior-year period. The decrease was primarily attributable to the €7,353 million decline in net income. This in turn was due among other factors to the €819 million impairment of the shareholding in Wintershall Dea and the likewise non-cash-effective gain of €5,684 million on the deconsolidation of Wintershall in the previous year, both of which are included in miscellaneous items. The €906 million increase in cash tied up in net working capital also contributed to the decline in operating cash flows. This was largely the result of a stronger reduction in trade accounts payable compared with the previous year. Higher precious metal trading positions due to growth in market prices and the fair values of derivatives also increased the level of cash tied up. The main offsetting effect was the cash released from the reduction in inventories.

Cash flows from investing activities also declined significantly to minus €2,525 million, after €452 million in the first half of 2019. The €427 million decrease in payments made for property, plant and equipment and intangible assets was more than offset by net payments made for acquisitions and divestitures. This related mainly to the purchase price of €1,308 million paid in the first half of 2020 for the polyamide business acquired from Solvay. In the previous year, net payments received from acquisitions and divestitures led to a cash inflow of €2,292 million, mainly from the merger of Wintershall and DEA on May 1, 2019.

Cash flows from financing activities amounted to €4,667 million, compared with minus €3,227 million in the prior-year period. This primarily reflected net additions of €7,799 million to financial and similar liabilities in the current year. As well as issuing two bonds in the amount of €1 billion each, we increased commercial paper by €5.2 billion. In the prior-year period, repayments exceeded additions to financial indebtedness by €214 million. Dividends paid in the first half of 2020 led to a cash outflow of €3,136 million, after €3,014 million in the prior-year period.

Free cash flow² in the first half of 2020 was minus €83 million, €680 million below the prior-year figure.

BASF enjoys good credit ratings, especially compared with competitors in the chemical industry. Standard & Poor’s have rated BASF “A/A-1/CreditWatch negative” since March 25, 2020. On June 25, 2020, Moody’s adjusted its rating for BASF from “A2/P-1/review for downgrade” to “A3/P-2/outlook stable.” The reasons cited for these changes included the economic impact of the corona pandemic and the related uncertainty.