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Last Update: 03/12/2009
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Part of the audited Consolidated Financial Statements and Management´s Analysis

Income from operations

–12 % Earnings decline compared with 2007, significant drop in many divisions in the fourth quarter

Income from operations amounted to €6,463 million in 2008, 11.7% lower than the record amount of €7,316 million in 2007. In 2008, we again earned a premium on our cost of capital amounting to €1,621 million; this compared with €2,895 million in 2007.
More information on the cost of capital concept can be found in the chapter “Value-based Management”

After a strong first half in 2008, the economic environment worsened steadily in the course of the second half of the year. Only South America remained largely unaffected. Raw material prices and demand declined considerably, in particular in the fourth quarter of 2008. We therefore significantly reduced production worldwide or shut down plants temporarily.

Earnings decreased in the Chemicals segment. This was primarily the result of a decline in earnings in the Petrochemicals division because of lower margins for cracker products and plant shutdowns due to lower demand toward the end of the year.

The Plastics segment also reported a decline in earnings. This was primarily due to lower volumes and margins in the Performance Polymers division.

Earnings in the Performance Products segment increased due to the strong performance of the Care Chemicals division. The Acrylics & Dispersions and Performance Chemicals divisions posted lower earnings.

In the Functional Solutions segment, earnings declined in all operating divisions. This was due to weaker demand from the automotive and construction industries as well as higher raw material costs, which negatively impacted margins.

Earnings in the Agricultural Solutions segment grew strongly due to higher sales volumes and margins.

Earnings rose in the Oil & Gas segment. The Exploration & Production business sector posted higher earnings as a result of the higher oil price. The Natural Gas Trading business sector posted a decline in earnings compared with 2007 due to lower margins.

Earnings in Other declined. This was due to expenses related to the hedging of raw material price risks as well as lower earnings in the Styrenics business. At year end 2008, the Styrenics business was no longer classified as a disposal group. Moreover, Other included income from the reversal of provisions for the BASF options program and higher earnings from the sale of fertilizers.

Income from operations (million €)

Income from operations of the BASF Group (bar chart)

INCOME FROM OPERATIONS


  • 2008 income from operations down 11.7% at €6,463 million
  • Special charges due to restructuring measures and writedowns
  • Strong earnings growth in the Agricultural Solutions and Oil & Gas segments

Special items

Income from operations was negatively impacted by special charges of €393 million in 2008 compared with €298 million in 2007.

Restructuring measures accounted for special charges of €257 million. The major part of this was due to the write-down of assets in the Styrenics business as a result of lower profitability.

Net special charges were also incurred as a result of divestitures to optimize our portfolio. In particular, this applied to the sale of real estate in North America. Special income resulted from the sale of the pharmaceuticals manufacturing business in Shreveport, Louisiana.

Other special charges were incurred by the Intermediates and Coatings divisions and the Styrenics business reported in Other. These units closed plants in Asia and the United States and had to write down other plants due to unsatisfactory profitability.

In 2008, other special income resulted from the reversal of a portion of the provisions established in 2006 due to the mothballing of the THF plant in Caojing, China.

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Special items

 

Million €

2008

2007

Restructuring measures

(257)

(185)

Divestitures

(5)

(3)

Other charges and income

(131)

(110)

 

(393)

(298)

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