BASF Report 2022

9. Other Operating Income and Expenses

Other operating income (Million €)

 

2022

2021

Income from the adjustment and release of provisions recognized in other operating expenses

141

241

Revenue from miscellaneous other activities

180

180

Income from hedging transactions and LTI programs

177

30

Income from foreign currency transactions and the translation of financial statements in foreign currencies

58

49

Gains on divestitures and the disposal of noncurrent assets

301

175

Reversals of impairment losses on noncurrent assets

18

13

Income from the reversal of valuation allowances for business-related receivables

36

32

Gains/losses from precious metal trading

282

388

Other

615

784

Other operating income

1,808

1,894

Income from the adjustment and release of provisions recognized in other operating expenses arose in 2022, as in the previous year, from the release of provisions in connection with the restructuring of the Global Business Services unit. Furthermore, income resulted from a restructuring of the global glufosinate-ammonium production network in North America. In both years, income also resulted from the adjustment to provisions for risks from lawsuits and damage claims, closures and restructuring measures, employee obligations, and various other individual items as part of the normal course of business. Provisions were reversed or adjusted if, based on the circumstances on the balance sheet date, utilization was no longer expected, or expected to a lesser extent.

In both years, revenue from miscellaneous other activities primarily included income from rentals, catering operations, cultural events and logistics services.

The increase in income from hedging transactions and LTI programs in 2022 was mainly attributable to income from virtual power purchase agreements and from hedges for raw materials in North America. In addition, income resulted in 2022 from the release of provisions for the long-term incentive (LTI) programs in the amount of €24 million. By contrast, expenses were incurred in 2021 for additions to these provisions.

Income from foreign currency transactions and the translation of financial statements in foreign currencies related to the translation of receivables and liabilities in foreign currencies and included income from the translation of companies’ financial statements whose local currency is different from the functional currency.

Gains on divestitures and the disposal of noncurrent assets in 2022 were mainly from the sale of 51% of shares in the company holding the interest in the Hollandse Kust Zuid wind farm and the sale of the production site in Quincy, Florida. Gains resulted in 2021 from the sale of a production site in Kankakee, Illinois, the sale of the share in the condensate splitter in Port Arthur, Texas, and the sale of the precision microchemicals business.

Reversals of impairment losses on noncurrent assets arose in 2022 in connection with the divestiture of a site in North America that had previously been fully impaired. In 2021, these were attributable to the divestiture of the production site in Quincy, Florida, and the associated attapulgite business.

Income from the reversal of valuation allowances for business-related receivables resulted both from the reversal of impairments for settled customer receivables for which impairments had been recorded previously as well as from adjusted expectations regarding default on individual customer receivables.

Other income included refunds in the amount of €169 million in 2022 and €211 million in 2021. This was due in both years to government grants in multiple countries, regional business development subsidies in China, and transaction tax refunds in Brazil. Additional income resulted in 2022 from damage compensation relating to hurricane Ida and extreme cold spells in North America in 2021. In 2021, additional income included compensation for environmental impact in the amount of €165 million and special income from the sale of non-capitalized know-how in the amount of €50 million.

Other operating expenses (Million €)

 

2022

2021

Restructuring and integration measures

486

461

Environmental protection and safety measures, costs of demolition and removal, and project costs not subject to mandatory capitalization

411

523

Depreciation, amortization and impairments of noncurrent assets and of the disposal groups

409

135

Costs from miscellaneous revenue-generating activities

171

150

Expenses from hedging transactions and LTI programs

61

62

Losses from foreign currency transactions and the translation of financial statements in foreign currencies

326

163

Losses from divestitures and the disposal of noncurrent assets

51

46

Expenses from the addition of valuation allowances on business-related receivables

31

107

Expenses for derecognition of obsolete inventory

437

290

Other

901

714

Other operating expenses

3,283

2,650

In 2022, expenses from restructuring and integration measures were attributable to the adjustment of business activities in Russia in the amount of €58 million, the carve-out of the BASF Environmental Catalyst and Metal Solutions unit within the Catalysts division, and as in the previous year, to global restructuring activities to improve competitiveness in various operating divisions. Expenses in both years also related to site closures in Europe and North America.

Expenses from integration measures in the amount of €32 million in 2022 and €7 million in 2021 related to the integration of the battery materials business, which had been acquired in 2021. In 2021, these also included expenses in the amount of €21 million for the integration of the global polyamide business, which had been acquired from Solvay in 2020.

Environmental protection and safety measures, costs of demolition and removal, and project costs not subject to mandatory capitalization were expensed if requirements for mandatory capitalization pursuant to IFRS were not met. Expenses for demolition, removal and project planning totaled €352 million in 2022 and €257 million in 2021 and mainly related to the Ludwigshafen site in Germany in both years. Further expenses arose in 2022 from the development of the new Verbund site in China and the battery materials business in Schwarzheide, Germany. Additionally, expenses of €59 million in 2022 and €266 million in 2021 arose from additions to environmental provisions. In both years, these concerned several discontinued sites in North America.

Depreciation, amortization and impairments of noncurrent assets and of the disposal groups in 2022 included impairments in the amount of €393 million relating primarily to plants in Ludwigshafen, Germany, and De Meern, Netherlands. In 2021, impairments amounted to €116 million due primarily to the closure of a plant in North America and impairments of plants in Asia. Impairments to construction in progress from discontinued investment projects were also included in both years.

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Costs from miscellaneous revenue-generating activities relate to the corresponding items presented in other operating income.

Expenses from hedging transactions and LTI programs in 2022 only included expenses from hedging transactions, primarily attribut­able to expenses for option premiums used to hedge natural gas purchases. In 2021, this item included expenses from LTI programs in the amount of €37 million. Further expenses resulted from changes in the fair value of currency derivatives and other hedging transactions in both years.

Losses from divestitures and the disposal of noncurrent assets were mainly due to the agreed divestiture of the De Meern site in the Netherlands in 2022 and to the divestiture of the global pigments business in 2021.

Expenses from the addition of valuation allowances on business-related receivables were significantly lower than in the previous year, in which valuation allowances had arisen particularly in connection with a transaction tax in Brazil.

In both years, other expenses included expenses for litigation, for REACH, for the provision of services and for warranties. Furthermore, other expenses for societal engagement and in connection with the coronavirus pandemic arose in both years.

Verbund
In the BASF Verbund, plants are intelligently connected. In this system, chemical processes consume less energy, produce higher product yields and conserve resources. The by-products of one plant serve as feedstock elsewhere, creating efficient value chains\_– from basic chemicals to high value-added solutions such as coatings or crop protection products. Our Verbund concept – realized in production, technologies, the market and digitalization – enables innovative solutions for a sustainable future.

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