Our financing policy is aimed at ensuring our solvency at all times, limiting the risks associated with financing and optimizing our cost of capital. We preferably meet our external financing needs on the international capital markets. We strive to maintain at least a solid “A” rating, which ensures unrestricted access to financial and capital markets. Our financing measures are aligned with our operational business planning as well as the company’s strategic direction and also ensure the financial flexibility to take advantage of strategic options.
Corporate bonds form the basis of our medium to long-term debt financing. These are issued in euros and other currencies with different maturities as part of our €20 billion debt issuance program.
For short-term financing, we use BASF SE’s U.S. dollar commercial paper program, which has an issuing volume of up to $12.5 billion. As of December 31, 2017, no commercial paper was outstanding under this program (December 31, 2016: $1,089 million). Firmly committed, syndicated credit lines of €6 billion serve to cover the repayment of outstanding commercial paper, and can also be used for general company purposes. These credit lines were not used at any point in 2017. Our external financing is therefore largely independent of short-term fluctuations in the credit markets.
To minimize risks and exploit internal optimization potential within the Group, we bundle the financing, financial investments and foreign currency hedging of BASF SE’s subsidiaries within the BASF Group where possible. Foreign currency risks are primarily hedged centrally by means of derivative financial instruments in the market. Off-balance sheet financing tools, such as leasing, are of minor importance for BASF.
Cash provided by operating activities improved by €1,068 million year-on-year to €8,785 million in 2017. This was due to higher net income. Free cash flow rose to €4,789 million compared with €3,572 million in the previous year, primarily due to the increase in cash provided by operating activities.
1 Including investments to the extent that they already had an effect on cash.
2 Cash provided by operating activities less payments related to property, plant and equipment and intangible assets.
Our ratings have remained unchanged since the publication of the BASF Report 2017. Rated “A1/P-1/outlook stable” by Moody’s, “A/A-1/outlook stable” by Standard & Poor’s and “A/S-1/outlook stable” by Scope, BASF enjoys good credit ratings, especially compared with competitors in the chemical industry. These ratings were most recently confirmed by Moody’s on December 19, 2017, by Standard & Poor’s on October 18, 2017, and by Scope on March 6, 2018.