6-K UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
April 28, 2005
BASF AKTIENGESELLSCHAFT
(Exact name of Registrant as Specified in its Charter)
BASF CORPORATION
(Translation of Registrant's name into English)
Carl Bosch Strasse 38, LUDWIGSHAFEN, GERMANY 67056
(Address of Principal Executive Offices)
Indicate by check mark whether the Registrant files
or will file annual reports under cover Form
20-F or Form 40-F
Form 20-F X Form 40-F
Indicate by check mark whether the Registrant by furnishing
the information contained in this Form is also thereby
furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.
Yes No X
If "Yes" is marked, indicate below the file number assigned to the
Registrant in connection with Rule 12g3-2(b): 82- .
BASF Makes a Strong Start to 2005
LUDWIGSHAFEN, Germany--(BUSINESS WIRE)--April 28, 2005--
-- Sales grow strongly due to higher volumes and prices
-- EBIT before special items up 33 percent
-- Cash flow increases further
-- Outlook for full year 2005 remains positive
In the first quarter of 2005, BASF's (NYSE:BF) (FWB:BAS) (LSE:BFA)
performance followed on smoothly from the very good fourth quarter of
2004. "We are constantly improving our portfolio according to the
motto 'Building strengths and eliminating weaknesses.' This creates
the conditions that are needed to ensure that we will continue to earn
a premium on our cost of capital in the future," said Dr. Juergen
Hambrecht, Chairman of the Board of Executive Directors, when
commenting on the company's first-quarter figures at BASF's 53rd
Annual Meeting on April 28, 2005. The good first quarter gives
Hambrecht grounds for optimism: "Demand for our products remains
strong. We are attempting to counter very high raw materials costs,
which are continuing to rise in some cases, with further price
increases. We are also rigorously implementing our restructuring
measures to ensure our long-term competitiveness."
First-quarter sales increased by 11 percent compared with the
strong first quarter of 2004 to over EUR 10 billion. Growth was
primarily due to price increases. Sales volumes were higher than in
the first quarter of 2004, in particular in the Chemicals and Plastics
segments. Sales rose by 14 percent if divestitures and currency
fluctuations are not taken into account.
Compared with the previous year, income from operations (EBIT)
before special items climbed 33 percent to EUR 1.6 billion. In the
Chemicals and Plastics segments, where capacity utilization was
predominantly high, there was a significant improvement in margins and
earnings. The Performance Products segment increased earnings despite
the divestiture of the printing systems business. Further reductions
in fixed costs contributed to the positive earnings trend throughout
the chemical businesses. Earnings in the Agricultural Products &
Nutrition segment declined slightly due to unsatisfactory
profitability in the Fine Chemicals division. In the Oil & Gas
segment, earnings benefited from high oil prices.
First-quarter EBIT after special items rose 39 percent to EUR 1.5
billion. Special items were related to various restructuring measures
that are recorded under "Other" until implementation in the course of
the year.
The financial result improved in particular due to higher earnings
from the stake in the Basell joint venture, which BASF is planning to
divest. Income before taxes and minority interests increased by 49
percent to EUR 1.5 billion.
The tax rate was 40 percent compared with 47 percent in the first
quarter of 2004. The decline was due to the higher contribution to
earnings from the NAFTA region. In addition, a charge for the tax
effect of planned dividend distributions from Group companies was
included in the first quarter of 2004. Income taxes contain taxes for
oil production that are noncompensable with German corporate income
tax. These oil production taxes increased from EUR 138 million to EUR
198 million due to higher income from operations from the exploration
for and production of oil.
Compared with the first quarter of 2004, net income climbed 66
percent to EUR 861 million. Earnings per share in the first quarter
were EUR 1.60 compared with EUR 0.94 in the same period of the
previous year.
Outlook for 2005 remains positive
In 2005, Hambrecht continues to expect global chemical production
to grow by approximately 3 percent, although the growth is likely to
vary widely from region to region.
The company has increased its forecast for the average price of
Brent crude oil from $35 to $45 per barrel; its forecast for the
average euro/dollar exchange rate remains unchanged at $1.30 per euro.
The strong start in the first quarter gives Hambrecht grounds for
optimism. The company expects higher sales and to follow on from the
high level of EBIT before special items (IFRS) posted in 2004, if
possible exceeding it. Uncertain factors continue to be the
development of oil prices and the U.S. dollar, as well as the
political situation in regional troublespots.
Sales increase in all regions - North America triples EBIT before
special items
Companies in Europe increased sales by 8 percent in the first
quarter of 2005. EBIT before special items rose by EUR 222 million to
EUR 1.1 billion. This was due in particular to higher margins and a
further reduction of fixed costs in the Chemicals and Plastics
segments.
In Germany, the increase in sales and earnings was due to the
improvement in the Oil & Gas segment.
In North America (NAFTA), sales by location of company improved by
24 percent in dollar terms. EBIT before special items tripled from EUR
90 million to EUR 271 million. All segments contributed to this
growth. The Chemicals segment performed particularly strongly due to
good capacity utilization of the steam cracker in Port Arthur, Texas,
combined with favorable margins for cracker products. The Agricultural
Products division also posted significantly higher earnings as a
result of strong demand for fungicides.
In Asia Pacific, companies increased sales in local currency terms
by 19 percent. The sales growth was due in particular to MDI and
polyurethanes systems in the Polyurethanes division. The new plant for
PolyTHF(R) in Caojing, China, successfully started operations, and
this will be followed by the THF plant in the second quarter. At the
Verbund site in Nanjing, China, the startup of the world-scale plants
is also proceeding according to schedule. EBIT before special items
was negatively impacted by startup costs for the two new sites.
In South America, Africa, Middle East, sales by location of
company increased by 4 percent in local currency terms. EBIT before
special items declined by EUR 7 million to EUR 71 million. In South
America, sales and earnings in the Agricultural Products division did
not reach the previous year's very strong level because dry weather
reduced demand for fungicides. The Plastics and Performance Products
segments posted higher sales and earnings.
BASF is the world's leading chemical company: The Chemical
Company. Its portfolio ranges from chemicals, plastics, performance
products, agricultural products and fine chemicals to crude oil and
natural gas. As a reliable partner to virtually all industries, BASF's
intelligent solutions and high-value products help its customers to be
more successful. BASF develops new technologies and uses them to open
up additional market opportunities. It combines economic success with
environmental protection and social responsibility, thus contributing
to a better future. In 2004, BASF had approximately 82,000 employees
and posted sales of more than EUR 37 billion. BASF shares are traded
on the stock exchanges in Frankfurt (BAS), London (BFA), New York
(BF), Paris (BA) and Zurich (AN). Further information on BASF is
available on the Internet at www.basf.com.
On April 28, 2005, you can also obtain further information from
the Internet at the following addresses:
Interim Report (from 7:30 a.m. CEST)
www.basf.de/interimreport (English)
www.basf.de/zwischenbericht (German)
Press release (from 7:30 a.m. CEST)
www.basf.de/pressrelease (English)
www.basf.de/presseinformation (German) englisch:
Live-Transmission - Speech Dr. Juergen Hambrecht
(from 10:00 a.m. CEST)
www.basf.de/shareholdermeeting (English)
www.basf.de/hauptversammlung (German)
Forward-looking statements
This release contains forward-looking statements under the U.S.
Private Securities Litigation Reform Act of 1995. These statements are
based on current expectations, 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 in BASF's Form 20-F filed with the Securities and Exchange
Commission. We do not assume any obligation to update the
forward-looking statements contained in this release.
First-Quarter Results 2005
January - March 2005, published on April 28, 2005
BASF makes a strong start to 2005
Overview BASF Group
1st Quarter
Change
Million EUR 2005 2004 in %
Sales 10,083 9,051 11.4
Income from operations before interest,
taxes
amortization and depreciation (EBITDA) 2,019 1,614 25.1
Income from operations (EBIT) before
special items 1,563 1,175 33.0
Income from operations (EBIT) 1,499 1,075 39.4
Financial result 45 (40) .
Income before taxes and minority
interests 1,544 1,035 49.2
Net income 861 520 65.6
Earnings per share (EUR ) 1.60 0.94 70.2
EBIT before special items in percent of
sales 15.5 13.0 -
Cash provided by operating activities 1,104 988 11.7
Additions to fixed assets(A) 362 518 (30.1)
Amortization and depreciation(A) 520 539 (3.5)
Segment assets (end of period)(B) 27,374 27,673 (1.1)
Personnel costs 1,277 1,297 (1.5)
Number of employees (end of period) 81,335 85,617 (5.0)
(A) Tangible and intangible fixed assets (including acquisitions)
(B) Tangible and intangible fixed assets, inventories and
business-related receivables
Starting from January 1, 2005, the accounting and reporting of the
BASF Group is performed according to International Financial Reporting
Standards (IFRS). The previous year's figures have been restated in
accordance with IFRS (see also the explanations on page 15 ff).
Contents
1 BASF Group Business Review and Outlook
4 Chemicals
5 Plastics
6 Performance Products
7 Agricultural Products & Nutrition
8 Oil & Gas
9 Regions
10 Consolidated Statements of Income
11 Consolidated Balance Sheets
12 Consolidated Statements of Cash Flows
13 Consolidated Statements of Equity
14 Segment Reporting
Effects of the Transition to International Financial Reporting
Standards (IFRS)
Perfect silicon disks
Modern computers have little room to spare with as many as a
billion transistors per square centimeter jostling for position on
their processors and memory chips. Imagine the entire population of
India holidaying in Washington DC and you'll have some idea of the
density. What makes it possible is that transistors are so small. And
that, in fact, is the biggest challenge in their production. Circuits
this tiny can be paralyzed by a particle smaller than a flu virus. A
single misplaced atom may render a chip useless.
Microchip production is complicated
More than 600 working steps are required to turn the raw material,
quartz sand, into a modern processor. Most of these steps require the
use of special chemicals, for example to clean and etch silicon chips.
"BASF is a leading manufacturer of electronic chemicals," says Claus
Poppe, Director Global Business Management for Electronic Chemicals.
"At least one BASF product was used in the production of any microchip
manufactured today." The first step is to get silicon (the building
material for most microchips) from simple quartz sand. To clean the
"dirty" silicon produced, technicians convert it into a clear liquid
that is easily purified by multiple distillations. The much cleaner
silicon emerging from this process is ready for the next step, in
which specialists use the Czochralski method to grow impressive shiny
silver crystals up to two meters tall with a perfect interior
structure. Special saws cut these crystals into paper-thin wafers that
form the basis of microchip production, but they need to be smoothed
down first and polished to a shine. Again, a number of high-purity
BASF chemicals such as nitric acid, sulfuric acid and hydrochloric
acid are used for the polishing and cleaning process. The finished
wafers are round disks measuring up to 30 centimeters across. Their
surface has to be absolutely perfect. The tolerance for irregularities
is limited to one fifty-thousandth of the diameter of a human hair.
When computers were first produced, technicians were able to solder
transistors by hand. Today's tiny circuits call for a different
technique. The modern technology for etching transistors onto wafers
is called photo-lithography. In this process, specialists first apply
a barrier layer to the silicon which they illuminate through a mask.
The layer dissolves at the sites exposed to light and the underlying
silicon layer is etched. Chip manufacturers treat the etched locations
with chemicals and repeat the process a number of times, building up
transistors layer by layer, like building houses from layers of
blocks. But dirt is everywhere. Metal devices invariably give off
unwanted atoms. Humans transmit impurities by a mere touch or breath.
That's not counting the approximately half a billion particles of dust
floating around a normal room. For this reason every step of chip
manufacture takes place in pristine working areas where all the
furnishings are plastic and filters are installed to remove the last
particle of dust from the ambient air. Anyone entering these
facilities must wear a full set of protective gear including gloves
and a face mask. "Finished microchips must be absolutely free of
contaminants, so the chemicals that are used in their manufacture have
to be extremely pure," explains Dr. Karl-Rudolf Kurtz, head of BASF's
Electronic Materials business unit. "BASF currently supplies around 30
chemicals of electronic grade purity." BASF is equipped with cleanroom
labs to check the chemicals' purity before they are delivered to chip
manufacturers. "We have the technology to detect impurities in trace
amounts of less than one microgram per tonne of product."
The Prospects
BASF is a leading supplier of chemicals to the semiconductor
industry. The global electronic chemical business acquired from Merck
KGaA at the start of 2005 significantly strengthens BASF's market
position. Electronic chemicals distribution is organized in a global
business management system for easier ordering and shorter delivery
times. BASF was conferred the UK gas supplier BOC Edwards' Supplier
Quality Award for the reliability and quality of its electronic gases
hydrogen chloride and ammonia. BASF is also the world's only supplier
of hydroxylamine free base, a highly active solvent for cleaning
microchips.
BASF Group Business Review and Outlook
- Sales grow strongly due to higher volumes and prices
- EBIT before special items up 33%
- Cash flow increases further
- Outlook for full year 2005 remains positive
Sales
We increased sales in the first quarter of 2005 by 11% compared
with the same period of 2004 to EUR10.1 billion. Growth was primarily
due to price increases. Sales volumes were higher than in the strong
first quarter of 2004, in particular in the Chemicals and Plastics
segments. Sales rose by 14% if divestitures and currency fluctuations
are not taken into account.
Factors influencing sales in comparison
with previous year
1st Quarter % of sales
Volumes 1
Prices 13
Currencies (2)
Acquisitions/divestitures (1)
Total 11
Sales by segment, 1st Quarter 2005
Million EUR
Chemicals 2005 1,822 15%
2004 1,582
Plastics 2005 2,800 21%
2004 2,307
Performance 2005 1,908 (1)%
Products 2004 1,929
Agricultural 2005 1,354 (6)%
Products &
Nutrition 2004 1,441
Oil & Gas 2005 1,840 32%
2004 1,394
The Chemicals and Plastics segments increased sales as a result of
overall strong volumes and higher sales prices.
The Performance Products segment also benefited from increased
sales prices, although the loss in sales following the divestiture of
the printing systems business could not be compensated for completely.
Sales in the Agricultural Products & Nutrition segment declined due to
weather conditions and lower sales prices in the Fine Chemicals
division. The Oil & Gas segment posted the strongest sales growth in
percentage terms as a result of high oil prices.
Special items 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Million EUR 2005 2004 2005 2004 2005 2004 2005 2004
Special items in
Income from
operations (64) (100) (16) (96) 175
Financial result - (21) (1) (16) (580)
Income before
taxes and
minority
interests (64) (121) (17) (112) (405)
Earnings
Compared with the previous year, we increased income from
operations (EBIT) before special items by 33% to EUR1,563 million.
In the Chemicals and Plastics segments, where capacity utilization
was predominantly high, there was a significant improvement in margins
and earnings. The Performance Products segment increased earnings
despite the divestiture of the printing systems business. Further
reductions in fixed costs contributed to the positive earnings trend
throughout the chemical businesses. Earnings in the Agricultural
Products & Nutrition segment declined slightly due to unsatisfactory
profitability in the Fine Chemicals division. In the Oil & Gas
segment, earnings benefited from high oil prices.
First-quarter EBIT after special items climbed 39% to EUR1,499
million. Special items were related to various restructuring measures
that are recorded under "Other" until implementation in the course of
the year.
The financial result improved in particular due to higher earnings
from our stake in the Basell joint venture, which we are planning to
divest. We increased income before taxes and minority interests by 49%
to EUR1,544 million.
EBIT before special items, 1st Quarter
2005
Million EUR
Chemicals 2005 426 70%
2004 251
Plastics 2005 269 74%
2004 155
Performance 2005 225 7%
Products 2004 210
Agricultural 2005 296 (1)%
Products
& Nutrition 2004 300
Oil & Gas 2005 484 41%
2004 343
The tax rate was 40% compared with 47% in the first quarter of
2004. The decline was due to the higher contribution to earnings from
the NAFTA region. In addition, a charge for the tax effect of planned
dividend distributions from Group companies was included in the first
quarter of 2004. Income taxes contain taxes for oil production that
are noncompensable with German corporate income tax. These oil
production taxes increased from EUR138 million to EUR198 million due
to higher income from operations from the exploration and production
of oil.
Compared with the first quarter of 2004, net income climbed 66% to
EUR861 million. Earnings per share in the first quarter were EUR1.60
compared with EUR0.94 in the same period of the previous year.
Outlook
We continue to expect global chemical production to grow by
approximately 3% in 2005, although the growth is likely to vary widely
from region to region.
We have increased our forecast for the average price of Brent
crude from $35 to $45 per barrel; our forecast for the average
euro/dollar exchange rate remains unchanged at $1.30 per euro.
Demand for our products remains strong. We are attempting to
counter very high raw materials costs, which are continuing to rise in
some cases, with further price increases in accordance with our "value
over volume" concept. The major highlight in the further course of the
year will be the startup of our new Verbund site in Nanjing, China. We
are rigorously implementing our restructuring measures to ensure our
long-term competitiveness. The strong start in the first quarter gives
us grounds for optimism. We expect to achieve higher sales and follow
on from the high level of EBIT before special items (IFRS) posted in
2004, if possible exceeding it. Uncertain factors continue to be the
development of oil prices and the U.S. dollar, as well as the
political situation in regional troublespots.
Significant events
Starting from January 1, 2005, the accounting and reporting of the
BASF Group is performed according to International Financial Reporting
Standards (IFRS). The previous year's figures have been restated; the
effects of the changes are explained on page 15 ff.
On April 11, BASF and its partner Gazprom announced a memorandum
of understanding to further strengthen their partnership. The two
partners will jointly develop the Yushno Russkoje natural gas field in
western Siberia and jointly participate in the construction of the
planned North European Gas Pipeline (NEGP) across the Baltic Sea. In
addition, Gazprom will increase its stake in the WINGAS joint venture
from currently 35%, and will thus become more heavily involved in the
joint marketing of natural gas in Europe.
On April 15, BASF acquired the electronic chemicals business of
Merck KGaA, Darmstadt, Germany. The acquisition includes production
sites and distribution centers for high-purity chemicals in Asia and
Europe. As of this date, these activities will be assigned to the
Inorganics division of the Chemicals segment and reported accordingly.
On April 19, BASF announced that it would continue with its share
buyback program, and plans to buy back shares for EUR1.5 billion in
2005.
BASF shares 1st
Quarter Full year
2005 2004
Share price (end of
period)(A) (EUR) 54.69 53.00
High(A) (EUR) 58.30 53.00
Low(A) (EUR) 51.34 40.49
Average daily trade
(million shares)(A) 2.60 2.71
BASF share performance(B) 3.2% 22.8%
DAX 30 performance(B) 2.2% 7.3%
EURO STOXX 50 performance(B) 3.8% 9.4%
Market capitalization (end
of period)
(billion EURO) 29.3 28.7
Number of shares (end of
period)
(million shares) 535.3 541.2
(A) XETRA trading
(B) with dividends reinvested
Chemicals
- Higher volumes and sales growth
- Earnings rise strongly by 70%
- High capacity utilization and further reduction of fixed costs
Overview Chemicals 1st Quarter
Change in
Million EUR 2005 2004 %
Sales 1,822 1,582 15
Thereof Inorganics 207 201 3
Petrochemicals 1,136 919 24
Intermediates 479 462 4
EBITDA 544 354 54
EBIT before special items 426 251 70
EBIT before special items in
percent of sales 23.4 15.9 -
EBIT 426 234 82
All divisions increased sales and earnings. Price increases to
pass on higher raw materials costs were the prime reason for the rise
in sales to EUR1.8 billion (volumes 5%, portfolio 1%, prices 12%,
currencies -3%). Earnings increased significantly, in particular due
to improved margins, high capacity utilization and a further reduction
in fixed costs.
Inorganics
Strong demand for our inorganic specialties, electronic chemicals
and catalysts led to an increase in sales. We also improved earnings
due to our measures to reduce fixed costs, for example the use of new
production technologies for basic chemicals. By acquiring the
electronic chemicals business of Merck KGaA, we are further expanding
our activities in this high-growth business area.
Petrochemicals
Sales climbed significantly thanks to price increases in all
product lines, in particular for cracker products. We benefited from
strong demand for plasticizers and solvents. As a result of higher
margins and very good capacity utilization, earnings increased
considerably compared with the same period of 2004. Raw materials
costs remain extremely high. In the second quarter, we will start
operations at the steam cracker and further world-scale plants at our
Verbund site in Nanjing, China.
Intermediates
The previous year's positive trend with regard to sales volumes
and prices continued in Europe and North America (NAFTA). Demand for
butanediol and its derivatives was particularly strong. We achieved
higher margins and earnings by further increasing prices. We
successfully started operations at our new plant for PolyTHF(R) in
Caojing, China. PolyTHF(R) is an important precursor for elastic
fibers used, for example, in sportswear.
Plastics
- Strong sales growth primarily due to price increases
- Earnings climb 74%
- Portfolio further optimized
Overview Plastics 1st Quarter
Change
Million EUR 2005 2004 in %
Sales 2,800 2,307 21
Thereof Styrenics 1,136 918 24
Performance Polymers 689 613 12
Polyurethanes 975 776 26
EBITDA 380 274 39
EBIT before special items 269 155 74
EBIT before special items in
percent of sales 9.6 6.7 -
EBIT 268 154 74
Sales again rose significantly due to higher prices and sales
volumes (volumes 3%, prices 20%, currencies -2%). Earnings in the
Performance Polymers and Polyurethanes divisions increased
considerably. In the Styrenics division, earnings were below the level
of the first quarter of 2004.
Styrenics
Higher sales prices led to an increase in sales, but this did not
compensate for the significant increase in the cost of the division's
most important raw material, benzene. This margin pressure resulted in
a decline in earnings. We intend to improve profitability by
increasing prices and by further optimizing the portfolio.
Performance Polymers
Sales growth resulted from continuous price increases throughout
the product portfolio and expansion of the engineering plastics
business. Earnings increased significantly. This was due primarily to
the realization of synergies from the integration of the engineering
plastics businesses acquired in prior years as well as the
optimization of production, in particular in Europe and North America
(NAFTA).
In the United States, our customer Mann + Hummel Inc. named BASF
"Perfect Supplier 2004."
In Asia, we intend to strengthen our engineering plastics business
with a new compounding plant in Shanghai, China, and by expanding the
compounding plant in Pasir Gudang, Malaysia.
Polyurethanes
Sales increased considerably in all regions. High prices for
important raw materials were passed on to the market in the form of
price increases, thus allowing the division to achieve further
profitable growth. The expansion of MDI capacity at the site in
Antwerp, Belgium, from 360,000 to 450,000 metric tons per year is
scheduled for completion in early May 2005.
Performance Products
- Higher sales from ongoing business
- Profitable growth in Functional Polymers boosts earnings
- Closer cooperation with customers on innovative products
Overview Performance Products 1st Quarter
Change
Million EUR 2005 2004 in %
Sales 1,908 1,929 (1)
Thereof Performance Chemicals 694 796 (13)
Coatings 472 505 (7)
Functional Polymers 742 628 18
EBITDA 304 294 3
EBIT before special items 225 210 7
EBIT before special items in
percent of sales 11.8 10.9 -
EBIT 224 203 10
Sales from ongoing business increased by 5% compared with the
previous year due to higher prices (volumes -1%, portfolio -6%, prices
8%, currencies -2%). Earnings also improved.
Performance Chemicals
The decline in sales was due to the divestiture of the printing
systems business in the fourth quarter of 2004. Sales from ongoing
business increased, in particular due to the contribution from
performance chemicals for detergents and formulators and for the
automotive and oil industry. Earnings were slightly lower due to the
divestiture of the printing systems business. On the basis of ongoing
business, however, earnings increased, thanks to a reduction in fixed
costs.
Coatings
Sales were below the previous year's level due to a decline in
sales of automotive coatings. Together with a further increase in raw
materials costs, this resulted in a decline in earnings. The
profitability of the industrial coatings business developed positively
due to streamlining of the portfolio and optimization of production.
We have further extended our cooperation with key customers. For
example, we act as a system supplier to BMW in China. In the important
Japanese automobile market, we have further strengthened our position
by acquiring our partner's shares in the joint venture BASF NOF
Coatings.
Functional Polymers
We grew profitably and faster than the market due to our
innovative product portfolio and close cooperation with our customers.
Sales increased significantly, in particular for acrylic monomers,
dispersions for architectural coatings, carpet coatings and paper
dispersions. Earnings also increased significantly because we passed
on higher raw materials costs to the market by increasing our sales
prices. We achieved the strongest earnings growth in North America
(NAFTA). We have added cyclohexyl methacrylate (CHM) - a special
acrylate to improve automotive coatings - to our product portfolio,
and have successfully started production at our Ludwigs-hafen site.
Agricultural Products & Nutrition
- Agricultural Products: profitability further increased
- Fine Chemicals: earnings situation unsatisfactory
Overview Agricultural Products 1st Quarter
Change
Million EUR 2005 2004 in %
Sales 959 983 (2)
EBITDA 332 302 10
EBIT before special items 276 254 9
EBIT before special items in
percent of sales 28.8 25.8 -
EBIT 284 234 21
The slight decline in sales (volumes -3%, prices 2%, currencies
-1%) was primarily due to weather conditions which reduced the use of
crop protection products in Europe and South America. This was
partially offset by significantly higher demand for fungicides in
North America, where our customers are preparing to combat Asian
soybean rust. A higher value product portfolio and improved cost
structures led to a further increase in earnings.
We are currently working to develop six new crop protection active
ingredients, on a new herbicide tolerance project and on products to
protect seeds with established active ingredients. These product
innovations have a total peak sales potential of EUR700 million and
will be ready for market in the coming years. A further seven crop
protection active ingredients with peak sales of EUR1 billion are
currently being introduced to the market. We have one of the most
promising pipelines in the industry.
Overview Fine Chemicals 1st Quarter
Change in
Million EUR 2005 2004 %
Sales 395 458 (14)
EBITDA 50 79 (37)
EBIT before special items 20 46 (57)
EBIT before special items in
percent of sales 5.1 10.0 -
EBIT 20 46 (57)
The decline in sales (volumes -1%, portfolio -2%, prices -10%,
currencies -1%) was primarily due to the severe decline in the price
of lysine, the highest volume product in our portfolio. In addition,
sales volumes of pharmaceutical active ingredients and premixes were
lower than in the first quarter of 2004. Organic acids and aroma
chemicals, however, continued to grow strongly. Earnings declined due
to the overall negative trend in sales volumes and prices. To some
extent, the decline was offset by the reduction of fixed costs. We are
addressing the challenging competitive environment through active
portfolio management, further cost-reduction measures, a closer focus
on innovative products as well as close cooperations with our
customers.
Oil & Gas
- Positive sales and earnings development due to considerably
higher oil prices
- New customers in natural gas trading
- Successful cooperation with Gazprom extended further
Overview Oil & Gas 1st Quarter
Change in
Million EUR 2005 2004 %
Sales 1,840 1,394 32
Thereof Exploration and
production 693 527 31
Natural gas trading 1,147 867 32
EBITDA 590 429 38
Thereof Exploration and
production 459 304 51
Natural gas trading 131 125 5
EBIT before special items 484 343 41
Thereof Exploration and
production 386 249 55
Natural gas trading 98 94 4
EBIT before special items in
percent of sales 26.3 24.6 -
Exploration and production 55.7 47.2 -
Natural gas trading 8.5 10.8 -
EBIT 484 343 41
Thereof Exploration and
production 386 249 55
Natural gas trading 98 94 4
The considerable increase in oil prices in terms of both dollars
and euros compared with the same period of 2004 resulted in
significantly higher sales (volumes 4%, prices/currencies 28%).
In the exploration and production business sector, production was
slightly higher than in the first quarter of 2004 due to increased oil
production in Libya and slightly higher gas volumes.
At EUR36.30 per barrel, the average price of Brent crude was 42%
higher than in the same period of the previous year, resulting in a
significant increase in earnings.
In the natural gas trading business sector, volumes increased
further and we acquired new customers. The increase in earnings was
due entirely to higher volumes. A gas supply contract was signed with
the German energy company Mark-E for a planned combined heat and power
plant.
On April 11, 2005, we signed a memorandum of understanding with
our partner Gazprom to jointly produce natural gas in western Siberia
and market it in Europe.
Regions
- Sales growth in all regions
- North America: earnings triple
- Asia: startup of plants in Nanjing and Caojing proceeds as
scheduled
Overview Sales Sales
Regions (location of (location of EBIT before special
company) customer) items
Change Change Change
Million EUR 2005 2004 in % 2005 2004 in % 2005 2004 in %
1st Quarter
Europe 6,102 5,634 8 5,851 5,387 9 1,134 912 24
Thereof
Germany 4,310 3,893 11 2,201 1,949 13 742 654 13
North
America
(NAFTA) 2,265 1,918 18 2,243 1,909 17 271 90 201
Asia
Pacific(A) 1,299 1,099 18 1,366 1,192 15 87 95 (8)
South
America,
Africa,
Middle
East(A) 417 400 4 623 563 11 71 78 (9)
10,083 9,051 11 10,083 9,051 11 1,563 1,175 33
Effective January 1, 2005, companies in Asia are reported in the
region "Asia Pacific." South America, which was previously reported as
a separate region, is now reported together with the African and
Middle Eastern companies in the region "South America, Africa, Middle
East."
Companies in Europe increased sales by 8% in the first quarter of
2005. EBIT before special items rose by EUR222 million to EUR1,134
million. This was due in particular to higher margins and a further
reduction of fixed costs in the Chemicals and Plastics segments.
In Germany, the increase in sales and earnings was due to the
improvement in the Oil & Gas segment.
In North America (NAFTA), sales by location of company improved by
24% in dollar terms. EBIT before special items tripled from EUR90
million to EUR271 million. All segments contributed to this growth.
The Chemicals segment performed particularly strongly due to good
capacity utilization of the steam cracker in Port Arthur, Texas,
combined with favorable margins for cracker products. The Agricultural
Products division also posted significantly higher earnings as a
result of strong demand for fungicides.
In Asia Pacific, companies increased sales in local currency terms
by 19%. The sales growth was due in particular to MDI and
polyurethanes systems in the Polyurethanes division. The new plant for
PolyTHF(R) in Caojing, China, successfully started operations, and
this will be followed by the THF plant in the second quarter. At our
Verbund site in Nanjing, China, the startup of our world-scale plants
is also proceeding according to schedule. EBIT before special items
was negatively impacted by startup costs for our two new sites.
In South America, Africa, Middle East, sales by location of
company increased by 4% in local currency terms. EBIT before special
items declined by EUR7 million to EUR71 million. In South America,
sales and earnings in the Agricultural Products division did not reach
the previous year's very strong level because dry weather reduced
demand for fungicides. The Plastics and Performance Products segments
posted higher sales and earnings.
Consolidated Statements of Income
1st Quarter Year
Change
Million EUR 2005 2004 in % 2004
Sales 10,083 9,051 11.4 37,537
Cost of sales 6,845 6,140 11.5 25,537
Gross profit on sales 3,238 2,911 11.2 12,000
Selling expenses 1,004 1,111 (9.6) 4,500
General and administrative
expenses 164 171 (4.1) 708
Research and development
expenses 283 263 7.6 1,182
Other operating income 126 97 29.9 951
Other operating expenses 414 388 6.7 1,381
Income from operations 1,499 1,075 39.4 5,180
(Expenses)/income from financial
assets 71 13 446.2 (598)
Interest result (40) (37) (8.1) (162)
Other financial results 14 (16) . (117)
Financial result 45 (40) . (877)
Income before taxes and minority
interests 1,544 1,035 49.2 4,303
Income taxes 622 483 28.8 2,206
Net income before minority
interests 922 552 67.0 2,097
Minority interests 61 32 90.6 131
Net income 861 520 65.6 1,966
Earnings per share (EUR) 1.60 0.94 70.2 3.58
Number of shares, in million
(weighted) 537 555 (3.2) 549
The interim financial statements have not been audited. The
financial statements were prepared for the first time in accordance
with International Financial Reporting Standards (IFRS); the previous
year's figure have been restated (see also the explanations on page 15
ff).
Consolidated Balance Sheets
Assets March March Dec.
Million EUR 31, 31, Change 31, Change
2005 2004 in % 2004 in %
Long-term assets
Intangible assets 3,543 4,004 (11.5) 3,610 (1.9)
Property, plant and
equipment 13,202 13,792 (4.3) 13,007 1.5
Investments accounted
for using the equity
method 1,165 1,670 (30.2) 1,092 6.7
Other financial assets 930 954 (2.5) 941 (1.2)
Deferred taxes 1,185 1,228 (3.5) 1,067 11.1
Other long-term assets 660 575 14.8 598 10.4
20,685 22,223 (6.9) 20,315 1.8
Short-term assets
Inventories 4,964 4,470 11.1 4,645 6.9
Accounts receivable,
trade 6,589 6,268 5.1 5,861 12.4
Other receivables and
miscellaneous short-
term assets 2,224 2,143 3.8 2,073 7.3
Liquid funds 3,007 909 230.8 2,291 31.3
16,784 13,790 21.7 14,870 12.9
Total assets 37,469 36,013 4.0 35,185 6.5
Stockholders' equity March March Dec.
and liabilities 31, 31, Change 31, Change
Million EUR 2005 2004 in % 2004 in %
Stockholders' equity
Subscribed capital 1,371 1,417 (3.2) 1,384 (0.9)
Capital surplus 3,037 2,991 1.5 3,022 0.5
Retained earnings 12,749 12,059 5.7 12,154 4.9
Other comprehensive
income 11 113 (90.3) (166) .
Minority interests 413 357 15.7 347 19.0
17,581 16,937 3.8 16,741 5.0
Long-term liabilities
Provisions for
pensions and similar
obligations 3,869 3,941 (1.8) 3,866 0.1
Other provisions 2,315 2,335 (0.9) 2,385 (2.9)
Deferred taxes 934 653 43.0 817 14.3
Financial indebtedness 1,966 3,071 (36.0) 1,845 6.6
Other liabilities 1,064 1,069 (0.5) 1,043 2.0
10,148 11,069 (8.3) 9,956 1.9
Short-term liabilities
Accounts payable,
trade 2,879 2,568 12.1 2,372 21.4
Provisions 2,547 2,422 5.2 2,508 1.6
Tax liabilities 1,110 897 23.7 644 72.4
Financial indebtedness 1,455 418 248.1 1,453 0.1
Other liabilities 1,749 1,702 2.8 1,511 15.8
9,740 8,007 21.6 8,488 14.8
Total stockholders'
equity and
liabilities 37,469 36,013 4.0 35,185 6.5
Consolidated Statements of Cash Flows
January - March
Million EUR 2005 2004
Net income 861 520
Depreciation and amortization of long-
term assets 521 547
Changes in net working capital (175) (62)
Miscellaneous items (103) (17)
Cash provided by operating activities 1,104 988
Payments related to tangible and
intangible fixed assets (393) (458)
Acquisitions/divestitures 139 (73)
Financial investments and other items 38 (71)
Cash used in investing activities (216) (602)
Proceeds from capital
increases/(decreases) (264) (165)
Changes in financial indebtedness 143 (15)
Dividends (19) (16)
Cash used in financing activities (140) (196)
Net changes in cash and cash equivalents 748 190
Cash and cash equivalents as of beginning
of year and other changes 2,094 540
Cash and cash equivalents 2,842 730
Marketable securities 165 179
Liquid funds 3,007 909
The previous year's figures were restated due to the transition to
IFRS. There were no significant changes.
As a result of the higher level of net income, cash provided by
operating activities increased by 12% in the first quarter to EUR1,104
million. Expansion of our business resulted in an increase in
inventories and receivables. Cash used in investing activities led to
a cash outflow of EUR216 million compared with EUR602 million in the
first quarter of 2004. At EUR393 million, payments related to tangible
and intangible fixed assets were below the previous year's level and
were significantly lower than the level of amortization and
depreciation on fixed assets of EUR521 million. There was a cash
inflow due to past acquisition activities; the first quarter of 2004
contained the acquisition of Sunoco's plasticizers business.
In cash used in financing activities, further share buybacks led
to a cash outflow. In the first quarter of 2005, 5,1 million shares
were bought back for EUR274 million or an average of EUR53.80 per
share. In the course of the year, it is planned to buy back shares for
a further EUR1.5 billion.
Liquid funds increased by EUR716 million to EUR3,007 million, and
at EUR3,421 million financial indebtedness rose by EUR123 million
compared with the figure at the end of 2004. Net debt declined to
EUR414 million.
Consolidated Statements of Equity
January - March 2005 Number of Subscribed Capital Retained
Million EUR subscribed capital surplus earnings
shares
outstanding
As of January 1, 2005 540,440,410 1,384 3,022 12,154
Share buyback and
cancellation of shares
including own shares
intended to be cancelled (5,091,410) (13) 15 (276)
Capital injection by
minority interests - - - -
Dividends paid - - - -
Net income - - - 861
Change in other
comprehensive
income - - - -
Change in scope of
consolidation
and other changes - - - 10
As of March 31, 2005 535,349,000 1,371 3,037 12,749
January - March 2005 Other Minority Stock-
Million EUR comprehensive interests holders'
income(A) equity
As of January 1, 2005 (166) 347 16,741
Share buyback and cancellation of
shares including own shares
intended to be cancelled - - (274)
Capital injection by minority
interests - 10 10
Dividends paid - (19) (19)
Net income - 61 922
Change in other comprehensive
income 177 11 188
Change in scope of consolidation
and other changes - 3 13
As of March 31, 2005 11 413 17,581
January - March 2004 Number of Subscribed Capital Retained
Million EUR subscribed capital surplus earnings
shares
outstanding
As of January 1, 2004 556,643,410 1,425 2,983 11,673
Share buyback and
cancellation of shares
including own shares
intended to be cancelled (3,270,000) (8) 8 (136)
Capital injection by
minority interests - - - -
Dividends paid - - - -
Net income - - - 520
Change in other
comprehensive
income - - - -
Change in scope of
consolidation
and other changes - - - 2
As of March 31, 2004 553,373,410 1,417 2,991 12,059
January - March 2004 Other Minority Stock-
Million EUR comprehensive interests holders'
income(A) equity
As of January 1, 2004 28 403 16,512
Share buyback and cancellation of
shares including own shares
intended to be cancelled - - (136)
Capital injection by minority
interests - (29) (29)
Dividends paid - (16) (16)
Net income - 32 552
Change in other comprehensive
income 85 (59) 26
Change in scope of consolidation
and other changes - 26 28
As of March 31, 2004 113 357 16,937
Contains income-neutral changes in equity (in particular,
translation adjustments and fair-value changes of financial
instruments)
Segment Reporting
Segments
Million EUR Sales EBITDA
1st Quarter 2005 2004 % 2005 2004 %
Chemicals 1,822 1,582 15.2 544 354 53.7
Plastics 2,800 2,307 21.4 380 274 38.7
Performance
Products 1,908 1,929 (1.1) 304 294 3.4
Agricultural
Products &
Nutrition 1,354 1,441 (6.0) 382 381 0.3
Agricultural
Products 959 983 (2.4) 332 302 9.9
Fine
Chemicals 395 458 (13.8) 50 79 (36.7)
Oil & Gas 1,840 1,394 32.0 590 429 37.5
Other(A) 359 398 (9.8) (181) (118) (53.4)
10,083 9,051 11.4 2,019 1,614 25.1
Research and
1st Quarter development expenses Assets(B)
Chemicals 27 27 0.0 5,416 5,165 4.9
Plastics 34 31 9.7 6,530 6,168 5.9
Performance
Products 50 55 (9.1) 4,711 5,073 (7.1)
Agricultural
Products &
Nutrition 86 82 4.9 6,700 7,479 (10.4)
Agricultural
Products 68 61 11.5 5,402 6,076 (11.1)
Fine
Chemicals 18 21 (14.3) 1,298 1,403 (7.5)
Oil & Gas 34 25 36.0 4,017 3,788 6.0
Other(A) 52 43 20.9 10,095 8,340 21.0
283 263 7.6 37,469 36,013 4.0
Segments Income from operations Income from operations
Million EUR before special items (EBIT)
1st Quarter 2005 2004 % 2005 2004 %
Chemicals 426 251 69.7 426 234 82.1
Plastics 269 155 73.5 268 154 74.0
Performance
Products 225 210 7.1 224 203 10.3
Agricultural
Products &
Nutrition 296 300 (1.3) 304 280 8.6
Agricultural
Products 276 254 8.7 284 234 21.4
Fine
Chemicals 20 46 (56.5) 20 46 (56.5)
Oil & Gas 484 343 41.1 484 343 41.1
Other(A) (137) (84) (63.1) (207) (139) (48.9)
1,563 1,175 33.0 1,499 1,075 39.4
Additions to fixed Amortization and
1st Quarter assets(C) depreciation(C)
Chemicals 88 175 (49.7) 118 120 (1.7)
Plastics 82 102 (19.6) 112 120 (6.7)
Performance
Products 54 66 (18.2) 80 91 (12.1)
Agricultural
Products &
Nutrition 31 55 (43.6) 78 101 (22.8)
Agricultural
Products 12 19 (36.8) 48 68 (29.4)
Fine
Chemicals 19 36 (47.2) 30 33 (9.1)
Oil & Gas 94 86 9.3 106 86 23.3
Other(A) 13 34 (61.8) 26 21 23.8
362 518 (30.1) 520 539 (3.5)
(A) "Other" includes the fertilizers business and other businesses
as well as expenses, income and assets not allocated to the segments.
This item also includes foreign currency results from financial
indebtedness that are not allocated to the segments as well as from
currency positions that are macro-hedged.
(B) The assets of "Other" includes the assets of the fertilizers
business and other businesses as well as assets that are not allocated
to the segments (financial assets, liquid funds, financial
receivables, deferred taxes; 1st quarter 2005: EUR8,437 million, 1st
quarter 2004: EUR6,707 million).
(C) Tangible and intangible fixed assets
Effects of the Transition to International Financial Reporting
Standards (IFRS)
Starting from January 1, 2005, the accounting and reporting of the
BASF Group is performed according to IFRS. The effect of retrospective
application of IFRS on income and equity of the BASF Group is shown
below. The IFRS figures for the year 2004 have not yet been attested
by the external auditor.
Overview 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
BASF Group 2004 2004 2004 2004 Year 2004
German German German German German
MillionEUR IFRS GAAP IFRS GAAP IFRS GAAP IFRS GAAP IFRS GAAP
Income
from
operations
(EBIT) 1,075 1,038 1,250 1,181 1,076 958 1,779 1,679 5,180 4,856
Financial
results (40) (60) 12 (23) (127) (93) (722) (661) (877) (837)
(Expenses)
/income
from
financial
assets(A) 13 (8) 45 26 (2) (25) (654) (602) (598) (609)
Interest
result (37) (52) (38) (49) (52) (68) (35) (59) (162) (228)
Other
financial
results (16) - 5 - (73) - (33) - (117) -
Income
before
taxes
and
minority
interests 1,035 978 1,262 1,158 949 865 1,057 1,018 4,303 4,019
Income
taxes 483 431 514 490 537 482 672 602 2,206 2,005
Minority
interests 32 32 34 34 46 46 19 19 131 131
Net income 520 515 714 634 366 337 366 397 1,966 1,883
Earnings
per share 0.94 0.93 1.30 1.15 0.67 0.62 0.67 0.73 3.58 3.43
Including write-downs and losses on sale of participating interests
Mar. June Sept. Dec.
Million EUR Jan. 1, 31, 30, 30, 31,
Note 2004 2004 2004 2004 2004
Stockholders' equity in
accordance with
German GAAP 15,879 16,289 15,991 16,097 15,765
Capitalization of interest
a 323 326 326 312 314
Capitalization of software
developed for internal use
b 114 107 101 96 81
Accounting for pensions(A)
c (156) (139) (122) (107) 177
Accounting for provisions
d 175 170 167 164 163
Accounting for financial
instruments
e (10) 4 51 (7) 191
Inventory valuation(A)
f 102 102 102 132 12
Reversal of goodwill
amortization and write-offs
due to
impairment
g - 31 58 86 109
Other adjustments
h (14) (14) (14) (14) (13)
Tax effects of planned
dividend payments
and other tax effects
i 46 (5) (5) (28) (58)
Valuation adjustments
relating to companies
accounted for
under the equity method
j 53 66 79 85 -
Adjustments in accordance
with IFRS 633 648 743 719 976
Stockholders' equity in
accordance with IFRS 16,512 16,937 16,734 16,816 16,741
Including effects of changes in valuation methods in the 2004
German GAAP annual financial statements
1st 2nd 3rd 4th
Million EUR Quarter Quarter Quarter Quarter Year
Note 2004 2004 2004 2004 2004
EBIT in accordance with
German GAAP 1,038 1,181 958 1,679 4,856
Capitalization of interest
a (17) (16) (18) (13) (64)
Capitalization of software
developed for internal
use
b (13) (10) (8) (23) (54)
Accounting for pensions(A)
c 27 28 23 (10) 68
Accounting for provisions
d (7) (2) 1 21 13
Accounting for financial
instruments
e (14) 14 1 86 87
Inventory valuation(A)
f - - 48 (51) (3)
Reversal of goodwill
amortization and write-
offs due to
impairmentg 41 35 39 36 151
Other adjustments
h (18) (18) (5) 17 (24)
Net financing cost of
pensions 38 38 37 37 150
Adjustments in accordance
with IFRS 37 69 118 100 324
EBIT in accordance with
IFRS 1,075 1,250 1,076 1,779 5,180
1st 2nd 3rd 4th
Million EUR Quarter Quarter Quarter Quarter Year
Note 2004 2004 2004 2004 2004
Net income in accordance
with German GAAP 515 634 337 397 1,883
Capitalization of interest
a 1 - (9) 12 4
Capitalization of software
developed for internal use
b (8) (6) (5) (14) (33)
Accounting for pensions(A)
c 17 17 15 (6) 43
Accounting for provisions
d (3) (4) (3) (2) (12)
Accounting for financial
instruments
e 5 32 (8) 104 133
Inventory valuation(A)
f - - 30 (32) (2)
Reversal of goodwill
amortization and write-
offs due to
impairment
g 31 27 28 27 113
Other adjustments
h - - (1) 1 -
Tax effects of planned
dividend payment and other
tax effects
i (51) - (24) (36) (110)
Valuation adjustments
relating to companies
accounted for
under the equity method
j 13 13 6 (85) (53)
Adjustments in accordance
with IFRS 5 80 29 (31) 83
Net income in accordance
with IFRS 520 714 366 366 1,966
Including effects of changes in valuation methods in the 2004
German GAAP annual financial statements
Explanations of the transition in accounting and valuation methods
to IFRS The accounting and reporting of the BASF Group was done
according to German GAAP for the periods up to and including the 2004
annual financial statements. International Financial Reporting
Standards (IFRS) were taken into account to the greatest extent
possible. Due to the EU regulation enacted on July 19, 2002, BASF, as
a listed company, was required to change its reporting. Effective
January 1, 2005, BASF converted its accounting completely to IFRS in
compliance with IFRS 1 "First-time Adoption." The previous year's
figures were adjusted accordingly. Effects of this transition were
netted against equity as of January 1, 2004. Changes compared with the
prior accounting methodology are described below:
(a) Capitalization of construction period interest
For qualifiying assets with a lengthy construction period,
interest on the project expenditures up to the point it is placed in
service can be capitalized. Construction period interest was
previously not capitalized, in conformance with German GAAP. According
to U.S. GAAP, capitalization of construction period interest is
required. In order to avoid a difference between IFRS and U.S. GAAP,
construction period interest is capitalized in these financial
statements. The amortization of capitalized construction period
interest reduced EBIT (first quarter 2004: EUR17 million, full year
2004: EUR64 million), whereas the capitalization of construction
period interest increased the financial result (first quarter 2004:
EUR17 million, full year 2004: EUR59 million). The assets of the
Chemicals and Plastics segments in particular increased as a result of
the capitalization.
(b) Capitalization of internally generated intangible assets
This item contains costs for software that is internally developed
and used. These costs are to be capitalized and depreciated as an
intangible asset according to IFRS. German GAAP did not allow
internally generated intangible fixed assets to be capitalized. IAS 38
"Intangible Assets" covers the capitalization of development costs.
Due to the stringent capitalization requirements, there has been no
capitalization of development costs to date.
(c) Pension accounting
The accounting treatment of direct pension obligations was already
performed in accordance with IAS 19 "Employee Benefits" in the 2004
annual financial statements. This led to a new valuation whereby
deferred actuarial gains and losses due to deviations from actuarial
assumptions were netted out against retained earnings. In addition,
certain pension obligations were financed via legally independent
plans, especially BASF Pensionskasse VVaG. Since BASF as the
sponsoring entity maintains guarantees, these plans are treated under
IFRS as defined benefit plans, and are to be included in the Group
financial statements. The inclusion of these pension plans was not
possible in the German GAAP financial statements. From now on, they
will be accounted for according to IAS 19, retrospective from January
1, 2004. Deferred actuarial gains and losses were not included in
accordance with the option under IFRS 1 "First-time Adoption." In
addition, the financing cost for pensions and other personnel
obligations was netted against the expected returns on plan assets
(first quarter 2004: EUR38 million, full year 2004: EUR150 million)
and shown in "Other financial results" rather than before EBIT.
(d) Accounting for provisions
These transition items contain the following differences:
- Under German GAAP, provisions were established for omitted
maintenance and repairs, and for mandated modifications in connection
with the operation of production facilities. According to IFRS, these
items are to be expensed as incurred. - Provisions for certain
environmental measures and recultivation measures have to be
capitalized under IFRS in the amount of the expected expense, thereby
increasing the acquisition costs of the affected assets. According to
German GAAP, costs were accrued over the useful life of the asset, in
contrast to IFRS, where such costs are depreciated following
capitalization. - According to German GAAP, provisions were accrued
for cyclical overhauls, which were to be carried out at specific
intervals. According to IFRS, the expenditures are to be capitalized,
and depreciated over the interval between cyclical overhauls. -
Long-term provisions are to be discounted according to IFRS, whereas
under German GAAP, they were reported at nominal value.
(e) Accounting for financial instruments
Accounting under IFRS requires derivatives to be accounted for at
fair value and shown as other assets and liabilities on the balance
sheet. Provided that the conditions for hedge accounting are not
fulfilled, changes in the fair value will affect income, just as with
corresponding gains and losses in the underlying instrument. Gains
from swaps and forward contracts were accounted for upon maturity
under German GAAP. Unrealized losses, however, were immediately
recognized in income within other provisions. According to German
GAAP, long-term receivables and liabilities in foreign currencies were
to be valued at the initial exchange rate, or at the exchange rate on
the date of the financial statements; the lower rate in the case of
receivables, or higher rate in the case of liabilities. According to
IFRS, valuation is always made at the exchange rate on the date of the
financial statements. Available-for-sale securities are to be valued
at their fair value on the date of the financial statements. Changes
in the fair value are shown as a component of equity (Other
comprehensive income) up until the point of disposal of the
securities. In German GAAP financial statements such securities are
valued at acquisition cost, or lower fair value on the date of the
financial statements, with valuation changes immediately affecting
income.
(f) Inventory valuation
Since the LIFO method is not allowed under IFRS, inventory
valuation method was changed for the 2004 annual financial statements
to the average cost method, which is allowed under IFRS.
According to German GAAP, raw materials and supplies are to be
discounted based on lower replacement costs. According to IFRS,
valuation adjustments may only be made in the event of a lower net
realizable value of the inventories. (g) Elimination of goodwill
amortization, and impairment-only approach Goodwill was formerly
amortized over its expected useful life, according to German GAAP.
According to IFRS 3 "Business Combinations," goodwill is to be
examined annually in accordance with IAS 36 "Impairment of Assets" to
determine if a write-down is necessary. Due to IFRS 1 "First-time
Adoption," in conjunction with IFRS 3 "Business Combinations," annual
amortization is no longer permitted effective January 1, 2004.
According to impairment tests carried out at the transition date and
at year-end 2004, impairment write-downs were not necessary. In
particular, earnings in the Agricultural Products division improved as
a result of the elimination of goodwill amortization (first quarter of
2004: EUR25 million, full year 2004: EUR96 million).
(h) Other adjustments
These relate primarily to the treatment of investment subsidies
that may not be immediately credited to income according to IFRS, but
instead reduce the acquisition costs of the respective assets, as well
as to reclassifications in the income statement.
(i) Tax effects of planned dividend distributions and other tax
effects
According to IFRS, in 2004, based on the updated financial plan
and taking into account a change in German corporate income tax law
(Section 8b KStG), deferred taxes were accrued for the tax effects of
planned dividend distributions from Group companies.
(j) Valuation adjustments for companies accounted for under the
equity method
The IFRS valuation adjustments especially concern the
capitalization and amortization of internally developed and used
software, as well as construction period interest for companies
accounted for under the equity method. Due to the valuation
adjustments, the book value of these financial assets as of January 1,
2004 was higher under IFRS than under German GAAP. The negative
reconciliation item to net income under ifrs was associated with
write-downs on these financial assets.
Changes in presentation
Presentation of the income statement and balance sheet is made in
accordance with IAS 1 "Presentation of Financial Statements." Certain
individual items were combined for clarity, and detailed separately
only in the Notes to the Consolidated Financial Statements:
- Balance sheet
IFRS requires a differentiation between long and short-term
assets, in contrast to German GAAP, where a breakdown by fixed assets
versus current assets was required. The item "Investments accounted
for using the equity method" contains, in particular, the stake in the
Basell joint venture that is scheduled for divestiture. In equity, the
new item "Other Comprehensive Income" is presented to account for
changes that do not affect income. The option under IFRS 1 to net the
translation adjustment against retained earnings and net profit as of
January 1, 2004 was exercised. Liabilities are segmented according to
maturity under IFRS, whereas under German GAAP it was segmented by
provisions and liabilities.
- Income statement
Financing costs for pensions and other personnel obligations
netted against the expected returns from plan assets are presented in
an item "Other financial results" according to IFRS, rather than
before EBIT. This item also contains the capitalization of
construction period interest, the discounting of other provisions as
well as changes in fair value of interest derivatives.
Segment reporting in accordance with IFRS
EBITDA 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
2004 2004 2004 2004 Year 2004
German German German German German
Million EUR IFRS GAAP IFRS GAAP IFRS GAAP IFRS GAAP IFRS GAAP
Chemicals 354 335 459 441 469 419 575 551 1,857 1,746
Plastics 274 265 292 280 293 268 334 337 1,193 1,150
Performance
Products 294 279 321 305 307 283 581 575 1,503 1,442
Agri-
cultural
Products &
Nutrition 381 370 375 362 86 65 251 249 1,093 1,046
Agri-
cultural
Products 302 297 306 300 45 33 234 230 887 860
Fine
Chemicals 79 73 69 62 41 32 17 19 206 186
Oil & Gas 429 426 443 440 582 578 644 631 2,098 2,075
Thereof
Exploration
and
production 304 300 351 351 463 459 521 506 1,639 1,616
Natural gas
trading 125 126 92 89 119 119 123 125 459 459
Other (118) (95) (75) (84) (58) (53) 189 99 (62) (133)
1,614 1,580 1,815 1,744 1,679 1,560 2,574 2,442 7,682 7,326
Income from
operations
before
special 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
items 2004 2004 2004 2004 Year 2004
Million German German German German German
EUR IFRS GAAP IFRS GAAP IFRS GAAP IFRS GAAP IFRS GAAP
Chemicals 251 245 340 333 367 331 419 425 1,377 1,334
Plastics 155 150 180 172 180 158 237 247 752 727
Performance
Products 210 196 233 217 216 192 191 185 850 790
Agri-
cultural
Products &
Nutrition 300 269 273 241 4 (36) 186 171 763 645
Agri-
cultural
Products 254 227 239 212 (11) (44) 184 161 666 556
Fine
Chemicals 46 42 34 29 15 8 2 10 97 89
Oil & Gas 343 343 339 339 459 458 512 507 1,653 1,647
Thereof
Exploration
and
production 249 247 278 279 371 369 418 410 1,316 1,305
Natural
gas
trading 94 96 61 60 88 89 94 97 337 342
Other (84) (65) (99) (105) (54) (49) 59 (31) (178) (250)
1,175 1,138 1,266 1,197 1,172 1,054 1,604 1,504 5,217 4,893
Income from
operations 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
(EBIT) 2004 2004 2004 2004 Year 2004
German German German German German
Million EUR IFRS GAAP IFRS GAAP IFRS GAAP IFRS GAAP IFRS GAAP
Chemicals 234 228 335 328 338 302 377 383 1,284 1,241
Plastics 154 149 171 163 169 147 200 210 694 669
Performance
Products 203 189 230 214 214 190 481 475 1,128 1,068
Agri-
cultural
Products
&
Nutrition 280 249 268 236 (26) (66) 136 121 658 540
Agri-
cultural
Products 234 207 235 208 (29) (62) 162 139 602 492
Fine
Chemicals 46 42 33 28 3 (4) (26) (18) 56 48
Oil & Gas 343 343 346 346 459 458 495 490 1,643 1,637
Thereof
Exploration
and
production 249 247 285 286 371 369 401 393 1,306 1,295
Natural
gas
trading 94 96 61 60 88 89 94 97 337 342
Other (139) (120) (100) (106) (78) (73) 90 - (227) (299)
1,075 1,038 1,250 1,181 1,076 958 1,779 1,679 5,180 4,856
Research and 1st 2nd 3rd 4th
development Quarter Quarter Quarter Quarter
expenses 2004 2004 2004 2004 Year 2004
German German German German German
Million EUR IFRS GAAP IFRS GAAP IFRS GAAP IFRS GAAP IFRS GAAP
Chemicals 27 28 25 27 26 27 20 22 98 104
Plastics 31 32 33 33 35 36 37 37 136 138
Performance
Products 55 56 55 56 61 62 46 47 217 221
Agricultural
Products &
Nutrition 82 83 85 86 91 92 104 104 362 365
Agricultural
Products 61 61 63 64 67 67 81 81 272 273
Fine
Chemicals 21 22 22 22 24 25 23 23 90 92
Oil & Gas 25 25 37 37 49 50 88 86 199 198
Thereof
Exploration
and
production 25 25 37 37 49 50 88 86 199 198
Natural
gas
trading - - - - - - - - - -
Other 43 36 43 36 47 41 37 34 170 147
263 260 278 275 309 308 332 330 1,182 1,173
Assets 1st Quarter 2nd Quarter 3rd Quarter
2004 2004 2004 Year 2004
German German German German
Million EUR IFRS GAAP IFRS GAAP IFRS GAAP IFRS GAAP
Chemicals 5,165 4,911 5,373 5,124 5,374 5,105 5,219 5,008
Plastics 6,168 5,985 6,216 6,032 6,426 6,231 6,187 6,044
Performance
Products 5,073 4,919 5,090 4,934 5,082 4,919 4,538 4,426
Agricultural
Products &
Nutrition 7,479 7,320 7,116 6,933 6,549 6,338 6,293 6,118
Agri-
cultural
Products 6,076 5,969 5,693 5,563 5,211 5,053 4,985 4,849
Fine
Chemicals 1,403 1,351 1,423 1,370 1,338 1,285 1,308 1,269
Oil & Gas 3,788 3,598 3,726 3,536 3,940 3,743 4,063 3,876
Thereof
Exploration
and
production 1,830 1,761 1,857 1,787 1,897 1,818 1,943 1,829
Natural
gas
trading 1,958 1,837 1,869 1,749 2,043 1,925 2,120 2,047
Other 8,340 8,336 8,166 8,084 8,732 8,892 8,885 8,444
36,013 35,069 35,687 34,643 36,103 35,228 35,185 33,916
Additions to fixed 1st 2nd 3rd 4th
assets Quarter Quarter Quarter Quarter
2004 2004 2004 2004 Year 2004
German German German German German
Million EUR IFRSGAAP IFRSGAAP IFRSGAAP IFRSGAAP IFRS GAAP
Chemicals 175 166 143 141 114 107 169 141 601 555
Plastics 102 98 110 105 102 100 159 151 473 454
Performance
Products 66 63 68 66 62 58 108 99 304 286
Agricultural
Products &
Nutrition 55 53 56 49 60 54 82 76 253 232
Agricultural
Products 19 18 17 15 22 20 42 42 100 95
Fine
Chemicals 36 35 39 34 38 34 40 34 153 137
Oil & Gas 86 80 58 55 120 109 124 130 388 374
Thereof
Exploration
and
production 82 77 58 55 105 94 84 91 329 317
Natural
gas
trading 4 3 - - 15 15 40 39 59 57
Other 34 33 31 30 33 32 46 44 144 139
518 493 466 446 491 460 688 641 2,163 2,040
Amortization and 1st 2nd 3rd 4th
depreciation(A) Quarter Quarter Quarter Quarter
2004 2004 2004 2004 Year 2004
German German German German German
Million EUR IFRSGAAP IFRSGAAP IFRSGAAP IFRSGAAP IFRS GAAP
Chemicals 120 107 124 113 131 117 198 168 573 505
Plastics 120 116 121 117 124 121 134 127 499 481
Performance
Products 91 90 91 91 93 93 100 100 375 374
Agricultural
Products &
Nutrition 101 121 107 126 112 131 115 128 435 506
Agricultural
Products 68 90 71 92 74 95 72 91 285 368
Fine
Chemicals 33 31 36 34 38 36 43 37 150 138
Oil & Gas 86 83 97 94 123 120 149 141 455 438
Thereof
Exploration
and
production 55 53 66 65 92 90 120 113 333 321
Natural
gas
trading 31 30 31 29 31 30 29 28 122 117
Other 21 25 25 22 20 20 99 99 165 166
539 542 565 563 603 602 795 763 2,502 2,470
Forward-looking statements
This report contains forward-looking statements under the U.S.
Private Securities Litigation Reform Act of 1995. These statements are
based on current expectations, 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 in BASF's Form 20-F filed with the Securities and Exchange
Commission. (The Annual Report on Form 20-F is available on the
Internet at www.basf.com.) We do not assume any obligation to update
the forward-looking statements contained in this report.
- Important Dates
- August 3, 2005
Interim Report Second Quarter 2005
- November 2, 2005
Interim Report Third Quarter 2005
- February 22, 2006
Financial Results 2005
- May 4, 2006
Annual Meeting, Mannheim
Interim Report First Quarter 2006
- Contacts
- Corporate Media Relations:
Michael Grabicki
Phone: +49 621 60-99938
Fax: +49 621 60-92693
E-mail: michael.grabicki@basf-ag.de
- Investor Relations:
Magdalena Moll
Phone: +49 621 60-48230
Fax: +49 621 60-92693
E-mail: investorrelations@basf-ag.de
- General inquiries:
Phone: +49 621 60-0
Fax: +49 621 60-42525
E-mail: info.service@basf-ag.de
- Internet: www.basf.com
- BASF Aktiengesellschaft
67056 Ludwigshafen
Germany
Publisher:
BASF Aktiengesellschaft
Communications BASF Group
67056 Ludwigshafen
Germany
You can find HTML versions of this and
other publications from BASF on our
homepage at www.basf.com.
You can also order reports:
- by telephone: +49 621 60-91827
- by fax: +49 621 60-20162
- by e-mail: medien-service@basf-ag.de
- on the Internet: www.basf.de/mediaorders
CONTACT: BASF
Michael Grabicki, +49 621 60-99938
Fax: +49 621 60-92693
michael.grabicki@basf-ag.de
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BASF Aktiengesellschaft
Date: April 28, 2005 By: /s/ Elisabeth Schick
------------------------------------
Name: Elisabeth Schick
Title: Director Site Communications
Ludwigshafen and Europe
By: /s/ Christian Schubert
------------------------------------
Name: Christian Schubert
Title: Director Corporate Communications
BASF Group