27. Statement of Cash Flows and Capital Structure Management

Statement of cash flows

Cash flows from operating activities contained the following payments:

In 2021, cash flows from investing activities included €600 million in payments made for acquisitions in connection with the purchase of BASF Shanshan Battery Materials Co., Ltd. (2020: €1,240 million for the acquisition of Solvay’s polyamide business).

Payments received for divestitures in the amount of €1,030 million were mainly from the sale of the pigments business. That included project-related tax payments of €65 million and special contributions to Swiss pension plan assets of €43 million. Payments received from the disposal of the equity-accounted investment in Solenis (€1,066 million) are reported in cash flows from investing activities under payments received from the disposal of noncurrent assets and securities. Gains on divestitures in the amount of €589 million was reclassified from cash flows from operating activities to cash flows from investing activities via gains (–) / losses (+) from the disposal of noncurrent assets and securities.

In 2020, payments received for divestitures resulted in the amount of €2,520 million from the sale of the construction chemicals business. These included tax payments in the amount of €150 million that were directly associated with the transaction. Further tax payments were accounted for in the amount of €31 million in 2021.

• For more information on acquisitions and divestitures, see Note 3

Payments made for property, plant and equipment and intangible assets amounted to €3,532 million, €403 million higher than in the previous year. In 2020, BASF SE transferred securities in the amount of €401 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 and cash equivalents consist primarily of cash on hand and bank balances with maturities of less than three months.

The cash and cash equivalents presented in the statement of cash flows may deviate from the figures in the balance sheet if the relevant amounts were reclassified to assets of disposal groups. As of January 1, 2021, cash and cash equivalents in the amount of €4,335 million reported in the statement of cash flows consisted of the balance sheet value (€4,330 million) and the value reclassified to the pigments business disposal group (€5 million). No cash and cash equivalents were reclassified to the disposal groups as of December 31, 2021; their balance in the statement of cash flows is therefore identical to that in the balance sheet. As of January 1, 2020, cash and cash equivalents in the amount of €2,455 million reported in the statement of cash flows 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).

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 in the table correspond to the figures in cash flows from financing activities.

Loan liabilities do not contain any interest components.

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.

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

• For more information on receivables and miscellaneous assets, see Note 18
• For more information on liabilities, see Note 21
• For more information on the statement of cash flows, see the Management’s Report

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 €42,081 million as of December 31, 2021 (December 31, 2020: €34,398 million); the equity ratio was 48.2% on December 31, 2021 (December 31, 2020: 42.8%).

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 BASF’s debt capital financing conditions. Since 2020, BASF has employed green corporate bonds to finance the development of sustainable products and projects with a clear environmental benefit.

BASF currently has the following ratings, which were most recently confirmed by Fitch on June 11, 2021, and by Moody’s on January 5, 2022. Standard & Poor’s adjusted its outlook for the A rating from “negative” to “stable” on July 16, 2021, and confirmed the rating on January 6, 2022.

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

• For more information on BASF’s financing policy, see the Management’s Report