BASF : Half-Year Financial Report 2021

Half-Year Financial

Report 2021

Q2 2021: BASF with very strong second quarter supported by higher prices and volumes

--Sales growth of 56% to €19,753 million

--EBIT before special items increased significantly to €2,355 million

--2021 outlook for sales raised to between €74 billion and €77 billion and for EBIT before special items to between €7.0 billion and €7.5 billion

Contents

On the cover:

Renewable energies play a central role in achieving climate neutrality. To meet growing demand, BASF will - among other things - acquire 49.5% of Vattenfall's Hollandse Kust Zuid wind farm. The relevant contract was signed at the end of June. This is BASF's first major investment in a renewable power facility. Once fully operational in 2023, the wind farm will be the largest commercial offshore wind farm in the world with 140 wind turbines and a total installed capacity of 1.5 gigawatt. This wind farm does not receive any subsidies for the power produced. On the cover, platforms are shown that enable construction on the wind farm and temporary materials storage at sea. Construction­ started in early July (photo: Vattenfall /Jorrit Lousberg).

Key Figures: BASF Group H1 2021																															3
Consolidated Interim Management's Report 2021																												4
Significant Events																																										4
Results of Operations																																		6
Segment sales and EBIT before special items																									7
Net Assets and Financial Position																										9
Net assets																																					9
Financial position																															9
Economic Environment and Outlook																								11
Information on Q2 2021																									12
BASF Group																																	12
Chemicals																																15
Materials																															16
Industrial Solutions																											17
Surface Technologies																						18
Nutrition & Care																								19
Agricultural Solutions																				20
Other																							21
Regions																					22
Condensed Consolidated Half-Year Financial Statements 2021											23
Statement of Income															23
Statement of Income and Expense Recognized in Equity										24
Balance Sheet													25
Statement of Cash Flows									27
Statement of Changes in Equity							28
Segment Reporting							29
Notes to the Consolidated Half-Year Financial Statements				30
Responsibility Statement			47

Half-Year Financial Report 2021

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Key Figures

Consolidated Interim Management's Report 2021

Information on Q2 2021

Condensed Consolidated Half-Year Financial Statements 2021

BASF Group H1 2021

Key Figures

BASF Group H1 2021

							Q2								H1
			2021		2020		+/-		2021		2020	+/-
Sales	Million €		19,753		12,680	56%		39,153		29,433	33%
Income from operations before depreciation, amortization and special items	Million €		3,217		1,229	162%		6,398		3,808	68%
Income from operations before depreciation and amortization (EBITDA)	Million €		3,199		1,070	199%		6,375		3,498	82%
EBITDA margin	%		16.2		8.4		−		16.3		11.9	−
Depreciation and amortizationa	Million €		883		1,011		-13%		1,748		1,983	-12%
Income from operations (EBIT)	Million €		2,316		59	.		4,627		1,515	205%
Special items	Million €			-39		-167	77%		-49			-351	86%
EBIT before special items	Million €		2,355		226	.		4,676		1,866	151%
Income before income taxes	Million €		2,189		-923	.		4,436		277	.
Income after taxes from continuing operations	Million €		1,794		-888	.		3,604			-7	.
Income after taxes from discontinued operations	Million €			−		14		−		−		36	−
Net income	Million €		1,654		-878	.		3,372		7	.
Earnings per share	€		1.80		-0.96	.		3.67		0.01	.
Adjusted earnings per share	€		2.03		0.25	.		4.03		1.51	167%
Research and development expenses	Million €		545		480	14%		1,056		974	8%
Personnel expenses	Million €		2,924		2,679	9%		5,871		5,505	7%
Employees (June 30)			107,646		117,563		-8%		107,646		117,563	-8%
Assets (June 30)	Million €		82,938		90,369		-8%		82,938		90,369	-8%
Investments including acquisitionsb	Million €		831		654	27%		1,376		2,790	-51%
Equity ratio (June 30)	%		45.9		42.5		−		45.9		42.5	−
Net debt (June 30)	Million €		16,241		20,519		-21%		16,241		20,519	-21%
Cash flows from operating activities	Million €		2,537		2,242	13%		2,012		1,212	66%
Free cash flow	Million €		1,770		1,516	17%		789			-83	.

1. Depreciation and amortization of property, plant and equipment and intangible assets (including impairments and reversals of impairments)
2. Additions to property, plant and equipment and intangible assets

Half-Year Financial Report 2021

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Key Figures

Consolidated Interim Management's Report 2021

Information on Q2 2021

Condensed Consolidated Half-Year Financial Statements 2021

Significant events

Consolidated Interim Management's Report 2021

Significant events

Corporate Targets

At a Capital Markets Day on March 26, 2021, BASF presented its roadmap to climate neutrality. BASF is setting itself even more ­ambitious goals than in the past and wants to achieve net zero emissions by 2050. Based on the most recent progress in developing low-emission and CO2-free technologies, the company is also significantly raising its medium-term 2030 target for reductions in greenhouse gas emissions: BASF now wants to reduce its greenhouse gas emissions worldwide by 25% compared with 20181 - and to achieve this despite targeted growth and the construction of an integrated Verbund site in Zhanjiang, China. Overall, BASF plans to invest up to €1 billion by 2025 to reach its new climate target and a further €2 billion to €3 billion by 2030.

A key way to further reduce CO2 emissions is to replace fossil

electricity­ with emission-free electricity. BASF and Vattenfall therefore announced on June 24, 2021, the signing of a contract for BASF's purchase of 49.5% of Vattenfall's wind farm, Hollandse Kust Zuid (HKZ). The purchase price is €0.3 billion. Including BASF's contribution to fund the construction of the wind park, BASF's total commitment amounts to around €1.6 billion. The transaction is ­expected to close in the fourth quarter of 2021, subject to the

approval­ of the relevant authorities. BASF intends to reduce its ­investment by selling shares to a financial co-investor.

Changes on the Board of Executive Directors

Wayne T. Smith left BASF's Board of Executive Directors as of May 31, 2021. Smith had been a member of the Board of Executive Directors since 2012 where he was most recently responsible for Monomers, Performance Materials, Petrochemicals, Intermediates, Process Research & Chemical Engineering as well as North ­America.

Michael­ Heinz took over for Smith on June 1, 2021, while retaining responsibility for South America. Dr. Melanie Maas-Brunner ­assumed the tasks in the divisions, European Site & Verbund

Management,­Global Engineering Services and Corporate ­Environmental Protection, Health & Safety, as well as the role of BASF SE's Industrial Relations Director from Heinz on the same date. She has been serving as Chief Technology Officer since

February­ 1, 2021, with responsibility for the three divisions, ­Advanced Materials & Systems Research, Bioscience Research, Process Research & Chemical Engineering, as well as for BASF New Business.

For more information on the redistribution of responsibilities within the Board of Executive Directors, see page 180 of the BASF Report 2020, Management and Supervisory Boards

Acquisitions

BASF and Hunan Shanshan Energy announced on May 20, 2021, that they had agreed to form a BASF majority-owned joint venture (BASF: 51%; Shanshan: 49%) to produce cathode active materials (CAM) and their precursors (PCAM) in China. Through this joint venture, BASF is further strengthening its position in Asia to create an ­integrated global supply chain for customers in China and world- wide. After the planned production startup of cathode active

materials­ in Europe in 2022, BASF will be the first company with CAM capacities in all major markets. The transaction closing is ­targeted for later this summer following the approval of the relevant antitrust authorities.

Divestitures

Following the approval of all relevant antitrust authorities, BASF concluded the sale of its manufacturing site in Kankakee, Illinois, to an affiliate of One Rock Capital Partners, LLC, a U.S.-based private equity firm, on May 31, 2021. The agreement includes the asso­ ciated ­businesses of vegetable-oil-based sterols and natural

vitamin­ E as well as anionic surfactants and esters produced at the ­Kankakee site. Branded as Kensing, the newly formed company has around 190 employees.

For more information on the sale of the manufacturing site in Kankakee, see the Notes to the ­Consolidated Half-Year Financial Report on page 31

As announced on June 16, 2021, the shareholders of Wintershall Dea - BASF and LetterOne - decided to postpone the initial public offering to a later date due to current market conditions. The IPO was previously planned for the second half of 2021, subject to market conditions.

Following the fulfillment of clearance conditions, BASF closed the divestiture of its global pigments business to the Japanese fine chemical company, DIC, on June 30, 2021. The purchase price on a cash and debt-free basis is €1.15 billion. BASF and DIC had signed an agreement on the acquisition of BASF's global pigments business with approximately 2,600 employees on August 29, 2019. The Dispersions & Pigments division was renamed Dispersions & Resins as of July 1, 2021 following the transaction closing.

For more information on the sale of BASF's global pigments business, see the Notes to the ­Consolidated Half-Year Financial Report on page 31

1 The new emissions target corresponds to a reduction of around 60% compared with 1990 and willl surpass the European Union's target of -55%.

Half-Year Financial Report 2021

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Key Figures

Consolidated Interim Management's Report 2021

Information on Q2 2021

Condensed Consolidated Half-Year Financial Statements 2021

Significant events

Events after June 30, 2021 (Events after the reporting period)

BASF and Clayton, Dubilier & Rice announced on July 6, 2021, the signing of an agreement to sell Solenis to Platinum Equity, a private equity company based in Los Angeles, California. The transaction implies an enterprise value for Solenis of $5.25 billion. That amount includes net financial debt of around $2.5 billion, subject to any

adjustments­at closing. Since February 1, 2019, BASF has held a 49% share in Solenis and has reported its share in the company using the equity method; 51% of the shares are held by funds ­managed by Clayton, Dubilier & Rice, and by Solenis management. Pending approval by the relevant authorities, the closing of the transaction is expected before the end of 2021.

For more information on the agreement on the sale of BASF's share in Solenis, see the Notes to the

Consolidated Half-Year Financial Report on page 46

On July 9, 2021, BASF provided advance notice that sales in the second quarter of 2021 totaling €19,753 million were considerably above the prior-year quarter, which had been negatively impacted by the coronavirus pandemic, and above analyst estimates. EBIT before special items and the BASF Group's EBIT were also

considerably­above market expectations as well as the weak prior­ -year quarter caused by the pandemic. As a result of the strong business development in the first half of 2021 and of the considerable increase in earnings expectations in the Chemicals and ­Materials segments, the forecast for the 2021 business year was revised.

For more information, see Economic Environment and Outlook on page 11 of this Consolidated

Half-Year Report

Half-Year Financial Report 2021

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