26. Capital Structure Management and Statement of Cash Flows

26.1 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 Single A rating. Capital structure is managed using selected financial ratios, such as dynamic debt ratios, as part of the company’s financial planning.

Equity of the BASF Group as reported in the balance sheet amounted to €36,992 million as of December 31, 2024 (previous year: €36,646 million); the equity ratio was 45.9% on December 31, 2024 (previous year: 47.3%).

BASF prefers to access external financing on the capital markets and, when advantageous, via bank loans. 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 last confirmed by Fitch on November 1, 2024, by Moody’s on November 18, 2024, and by Standard & Poor’s on December 2, 2024.

BASF strives for a Single A rating, which ensures unrestricted access to financial and capital markets (for more information on BASF’s financing policy, see the Combined Management’s Report).

26.2 Statement of cash flows

Accounting policies

Cash flows from operating activities are determined using the indirect method whereby changes in balance sheet items are adjusted for currency translation effects and changes in the scope of consolidation and thus cannot be derived directly from the consolidated balance sheet.

BASF reports interest paid and dividends received in cash flows from operating activities. Income tax payments from ongoing business are also allocated to cash flows from operating activities. In the case of material transactions, however, these are reported in the corresponding section of the statement of cash flows.

Cash flows from financing activities include payments for leases in which BASF is lessee as well as dividend payments.

Payments are netted in cash flows from investing activities and cash flows from financing activities if they are items with a high turnover rate, represent large amounts and have short-term maturities (for more information on the statement of cash flows, see the Combined Management’s Report).

Explanation of the statement of cash flows

Cash flows from operating activities contained the following payments:

In order to optimize precious metal stocks, the Group sells precious metals and concurrently enters into agreements to repurchase them at a set price. Cash flows resulting from the sale and repurchase in the amount of –€55 million (previous year: –€447 million) were reported in cash flows from operating activities.

Factoring agreements in the amount of €359 million had a negative impact on cash flows from operating activities in 2024 (previous year: positive impact, €560 million).

The carrying amount of financial liabilities that are the subject of supplier financing agreements and are reported as trade accounts payable amounted to €80 million in 2024 (previous year: €77 million). Of this, an amount of €73 million was already paid by the financial services provider (previous year: €71 million). The payment terms for these liabilities ranged between 0 and 120 days and for comparable trade accounts payable that were not the subject of the agreements, between 0 and 60 days.

In 2024, cash flows from investing activities included €202 million in payments made for acquisitions. This included the purchase price payment of €192 million for the acquisition of one of the two MDI plants and the production plants for the precursors aniline and nitrobenzene resulting from the joint venture with Huntsman, Shanghai Lianheng Isocyanate Co. Ltd., Shanghai, China. In the previous year, payments for acquisitions were recognized in the amount of €5 million.

Payments received from divestitures amounted to €75 million and related solely to immaterial transactions. In the previous year, payments received amounted to €32 million (for more information, see Note 3).

Payments made for property, plant and equipment and intangible assets amounted to €6,198 million, €803 million higher than in the previous year. This also includes capitalized interest in the amount of €147 million (previous year: €80 million).

Payments for investments in equity instruments in 2024 included €598 million for the acquisition and several subsequent capital increases of the equity-accounted shareholding in the Nordlicht 1 and 2 wind farm projects.

In 2024, payments received from the disposal of equity instruments included the payment from the sale of Wintershall Dea GmbH’s exploration and production business (Wintershall Dea AG until September 23, 2024), Kassel/Hamburg, Germany, to Harbour Energy plc, London, United Kingdom, in the amount of €1,169 million. In addition, Wintershall Dea made a capital repayment in the amount of €556 million.

Cash and cash equivalents in the amount of €2,921 million (previous year: €2,624 million) consist primarily of cash on hand and bank balances with maturities of less than three months. As in the previous year, these were not subject to any utilization restrictions in 2024. However, the repayment of funds from Russia is currently only possible to a limited extent. These amounted to €20 million as of December 31, 2024 (previous year: €21 million).

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 December 31, 2024, cash and cash equivalents were reported in the amount of €2,921 million in the statement of cash flows; this included the balance sheet value (€2,914 million) as well as the value reclassified to the disposal group (€7 million). In the previous year, the value in the balance sheet and in the statement of cash flows were the same.

Lease payments totaled €679 million in 2024 (previous year: €654 million). The principal component of €413 million (previous year: €401 million) is presented in cash flows from financing activities. BASF reports interest payments, which amounted to €65 million (previous year: €54 million), in cash flows from operating activities. Payments in connection with short-term leases, lease payments relating to low-value assets, and variable lease payments that were not taken into account in the measurement of the lease liability amounted to €201 million in 2024 (previous year: €199 million).

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 on the left correspond to the figures in cash flows from financing 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 under the balance sheet item other liabilities, in which financial instruments are presented.

Assets/liabilities from hedging transactions included in cash flows from financing activities 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.