Ladies and gentlemen, on behalf of BASF, I would like to welcome you to our conference call on the full year 2021 results. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. If you'd like to ask a question, you may press star followed by one. When preparing to ask your question, please ensure that your phone is unmuted locally. If any participant has difficulty hearing the conference, please press the star key followed by zero on your telephone for operator assistance. This presentation contains forward-looking statements. These statements are based on current estimates and projections of the Board of Executive Directors and currently available information. Forward-looking statements are not guarantees of the future developments and results outlined therein. These are dependent on a number of factors.
They involve various risks and uncertainties, and they are based on assumptions that may not prove to be accurate. Such risk factors include those discussed in opportunities and risks of the BASF Report 2021. BASF does not assume any obligation to update the forward-looking statements contained in this presentation above and beyond the legal requirements. On the call with me today are Martin Brudermüller, Chairman of the Board of Executive Directors, and Hans-Ulrich Engel, Chief Financial Officer. Please be aware that we have already posted the speech on our website at basf.com/fy 2021. Now, I would like to hand over to Martin Brudermüller.
Good morning and welcome, ladies and gentlemen. It's really hard to go back to business as usual the day after Russia attacked the Ukraine. Yesterday marks the end of peace in Europe. It's a bitter day for all of us. A short time ago, no one would have thought it possible. We are dismayed by the attack and are very concerned about further developments. We are all thinking at the moment of the people in Ukraine who have the fear for their lives and their future. Nevertheless, Hans-Ulrich Engel and I would like to welcome you to our analyst conference call for the full year 2021. 2021 was a strong year for BASF. 67% by the Chemicals and Materials segment. The Surface Technologies and Industrial Solutions segment also contributed considerably to the strong recovery.
Looking at the underlying sales development, we increased sales prices by 25% and volumes by 11%. All segments achieved price and volume growth in 2021. Cash flow from operating activities improved by 34% and amounted to EUR 7.2 billion as compared to EUR 5.4 billion in 2020. Free cash flow increased by EUR 1.4 billion to EUR 3.7 billion in 2021. BASF's Automotive-related business continued to be negatively impacted by the semiconductor shortage. According to current data, global automotive production reached around 76 million units in 2021, and thus increased only slightly compared with the very low level of the previous year. For 2021-2022, IHS Markit expects 84 million units.
We assume that the semiconductor shortage will persist at least in the first half of 2022. We therefore expect just 82 million units to be produced and are less optimistic than IHS for the full year. Throughout 2021, and particularly in the fourth quarter, higher raw material prices and increased energy and logistics costs burdened the earnings development in all segments. Consequently, we will focus on further substantial price increases in the coming months to pass on the significantly higher costs and improve our margins in the downstream businesses. The established pricing procedures in these businesses leads to a delay in passing on costs. Let's now turn to the macroeconomic environment. According to the currently available data, global growth in the chemical industry was 6.1% in 2021.
The strongest growth in chemical production was achieved in China, the world's largest chemical market, with a full-year expansion of 7.7%. Here, however, growth slowed at a high level during the course of the year. Electricity cuts had a negative effect on production, particularly in the third and fourth quarters. Growth in Asia, excluding China, reached 6.2% in 2021. Chemical production growth in the European Union was extraordinarily high at 6%. A contributing factor was the low basis in the previous year. In addition, the European chemical industry benefited from the fact that availability of global production capacities for basic chemicals was limited. In the United States, significant petrochemical capacities were temporarily unavailable. After the freeze in the first quarter, production on the U.S. Gulf Coast was also negatively impacted in the summer by Hurricane Ida and Hurricane Nicholas.
In total, chemical production in North America grew by only 1.7% in 2021. On this slide, you can see BASF's volume growth by region compared with the prior year. With an increase in volumes of 10.6% in 2021, BASF Group's growth was 4.5 percentage points above global chemical production. Let's now look at the volume development in the regions. With 14.4%, our volume growth was most pronounced in Asia, excluding Greater China. In North America, sales volumes grew by 10.6%, and in Europe by 10.1%. In Greater China, we increased volumes by 8.7% compared with an already very strong prior year. Volume development in the fourth quarter of 2021 was burdened, in particular by lower demand for mobile emission catalysts.
This was a result of overall lower automotive production due to the semiconductor shortage. The electricity cuts for energy-intensive industries had only a minor impact on BASF operations in China. We now look at our sales and earnings development by segment in 2021. Hans will come, comment later on the specific development in Q4. At BASF Group level, sales increased by 33% to EUR 78.6 billion due to considerably higher prices and volumes in all segments. Currency effects had a slightly negative effect and were mainly euro related to the US dollar. BASF Group's EBIT before special items reached EUR 7.8 billion, an increase of 118% compared with 2020. All segments, with the exception of Nutrition & Care and Agricultural Solutions, increased EBIT before special items in 2021.
The rise in earnings was driven, in particular, by the Chemicals and Materials segments. For detailed explanations of the 2021 earnings development by segment, please refer to the BASF Report 2021 published this morning. Let's now look at our financial and non-financial targets. We achieved all our financial targets in 2021, and we have taken important steps to deliver on our midterm CO2 emission target. As mentioned before, our sales volume growth was well above the global chemical production. EBITDA before special items increased from EUR 7.4 billion to EUR 11.3 billion, and thus by 53%. Our 2021 ROCE of 13.5% was considerably above the cost of capital rate of 9%.
For 2021, we will propose a dividend of EUR 3.40 per share to the annual shareholders meeting, thus delivering on our progressive dividend policy. We want to reduce our absolute CO2 emissions by 25% by 2030 compared with the baseline 2018. In 2021, our CO2 emissions amounted to 20.2 million metric tons, a decrease from 20.8 million metric tons emitted in 2020. This is remarkable given this growth, strong growth in volumes. We also set a target of EUR 22 billion in sales with accelerator products by 2025. These are products that make a substantial sustainability contribution in the value chain. In 2021, in 2020.
We thus achieved our accelerator sales target much earlier than planned. We will therefore adjust portfolio steering target in the course of 2022. Ladies and gentlemen, creating value for our shareholders is a top priority for us, and this is why we aim to increase the dividend per share every year based on a strong cash flow, free cash flow. At this year's annual shareholder meeting, the Board of Executive Directors and the Supervisory Board will propose to pay a dividend of EUR 3.40 per share, an increase of 10%. The share offers an attractive dividend yield of 5.5% based on the share price at the end of 2021. Since we have already received several inquiries, I would like to provide a short update about this year's annual shareholders meeting.
The Board of Executive Directors and the Supervisory Board have decided to hold a virtual annual shareholder meeting on April 29. The pandemic and the expected number of participants will not yet permit a physical meeting in 2022. The invitation with detailed information will be published in mid-March. Now I would like to hand over to Hans.
Thank you, Martin, and good morning, ladies and gentlemen, also from my side. I would like to start with a brief overview of BASF's most relevant portfolio measures. In August 2021, BASF and Shanshan formed BASF Shanshan Battery Materials. BASF owns a majority stake of 51% in this company. With the completion of the transaction, we have reached a significant milestone in executing our strategic roadmap to build up a global battery materials value chain, equipped with an industry-leading annual CAM capacity of 160 kilotons by 2022. In June 2021, we closed the divestiture of our global pigments business to the fine chemical company DIC. The purchase price on a cash and debt-free basis amounted to EUR 1.15 billion. In November 2021, BASF and Clayton, Dubilier & Rice sold Solenis to Platinum Equity.
With the divestiture of our 49% share in Solenis, we benefited from the value creation that was achieved by combining Solenis and BASF's Paper, Wet End, and Water Chemicals businesses in 2019. Our share in the purchase price amounted to EUR 1.1 billion. The disposal gain of EUR 589 million is reported as a special item below EBIT in net income from shareholdings. In June 2021, we announced the postponement of the IPO of Wintershall Dea. Strategically and in line with the original agreement with LetterOne, we remain fully committed to achieving an IPO of Wintershall Dea. You may have seen that representatives of LetterOne have now questioned this objective, contrary to the originally agreed strategy.
Given the significant strategic relevance of the IPO for BASF and our stakeholders, we will use all available means to protect our rights and interests, including legal remedies and the right to unilaterally IPO in 2023. In 2021, Wintershall Dea generated an EBITDA of EUR 3.8 billion, an increase of 133% compared with 2020. The EBITDA is defined as earnings before interest in taxes, depreciation, amortization, and exploration expenses. It's a common indicator for financial performance in the oil and gas industry. Wintershall Dea free cash flow improved considerably from EUR 159 million in 2020 to EUR 2.1 billion in 2021. Let me also give you a final update on our excellence program. We concluded the program within budget and on time, and exceeded the targeted annual EBITDA contribution, reaching EUR 2.1 billion by the end of 2021.
The associated costs amounted to around EUR 140 million in 2021. On top of this excellence program, we have implemented specific efficiency programs in our service units and operating divisions. For example, the realignment of our Global Business Services unit will result in savings of more than EUR 200 million per year from 2023 onwards. We expect savings of a similar magnitude from efficiency and optimization measures in our Global Digital Services unit from 2023 onwards. Furthermore, the operating divisions are continuing to drive forward their unit-specific efficiency programs. In the following, I will turn to the financial figures of BASF Group in the fourth quarter of 2021, compared with the prior year quarter in more detail. Overall, the fourth quarter was characterized by higher raw material prices and logistics costs, as well as a steep increase in energy costs, particularly in December.
Some of these increases can only be passed on to our customers with a certain time lag. I will start with sales, which increased by 24% to EUR 19.8 billion. Despite the comparison with the strong prior year quarter, BASF was able to increase volumes in all segments, except for Materials in Q4 2021. EBITDA before special items increased by around EUR 100 million to reach EUR 2.2 billion. EBITDA amounted to EUR 2.3 billion compared with EUR 2 billion in Q4 2020. EBIT before special items came in at EUR 1.2 billion compared with EUR 1.1 billion in Q4 2020. Special items in EBIT amounted to +EUR 1 million compared with -EUR 181 million in the fourth quarter of 2020.
EBIT came in at EUR 1.2 billion in Q4 2021, compared with EUR 932 million in Q4 2020. At EUR 97 million, net income from shareholder holdings improved slightly in the fourth quarter of 2021. This improvement was mainly driven by the disposal gain from the divestiture of Solenis, while impairments on our shareholding in Wintershall Dea had a negative impact. Net income amounted to EUR 898 million compared with EUR 1.1 billion in the prior year quarter. The tax rate was 19.9% compared with 24.7% in Q4 2020. This decrease resulted mainly from the tax-free disposal gain from divesting our share in Solenis. Reported earnings per share declined from EUR 1.15 in the prior year quarter to EUR 0.98 in Q4 2021.
Adjusted EPS increased to EUR 1.17 in the fourth quarter of 2021. In the prior year quarter, it was EUR 1.10. Cash flows from operating activities increased by EUR 1.2 billion to EUR 3.3 billion in Q4 2021. This increase was mainly driven by a higher cash inflow from changes in net working capital because of lower accounts receivable and higher accounts payable. Free cash flow came in at EUR 1.8 billion, an increase of 84% compared with Q4 2020. Now on the next slide, you see the sales and earnings development by segment in the fourth quarter of 2021. Compared with the prior year quarter, BASF Group increased sales from EUR 15.9 billion to EUR 19.8 billion.
Considerably higher prices and slightly higher volumes, as well as positive currency effects were the main drivers for this. Currency effects were primarily related to the US dollar and the renminbi. All segments contributed to the sales increase in the fourth quarter. EBIT before special items increased by 10% to EUR 1.2 billion in Q4 2021. Considerably higher earnings in the Chemicals segment and in others compensated for lower contributions from the remaining segments. For details on the earnings development by segment, please refer to the reporting fact sheet we published this morning. I will now give you an update on the impact of the natural gas price development in Europe. Natural gas prices further increased in the final quarter of the year, reaching an all-time high in December.
For our European sites, the additional cost due to higher natural gas prices in 2021 amounted to around EUR 1.5 billion. The fourth quarter of 2021 alone accounted for EUR 800 million of this amount. The earnings of our operating divisions were directly burdened by these cost increases compared with the previous year. Let's now move on to our cash flow development, where we'll comment on the full year figures. Cash flows from operating activities amounted to EUR 7.2 billion, compared with EUR 5.4 billion in the previous year. The considerable increase was primarily due to the improvement in net income. An offsetting factor was cash tied up in net working capital, which rose by EUR 1.2 billion to EUR 1.6 billion in 2021.
This mainly resulted from the significant increases in inventories and trade accounts receivable due to higher business volumes and prices. Cash flows from investing activities totaled -EUR 2.6 billion in 2021, after -EUR 1.9 billion in the previous year. Payments received for divestitures and the disposal of the shareholding in Solenis in 2021 were below the figure from the disposal of the construction chemicals business in the previous year. Cash flows from financing activities amounted to -EUR 6.5 billion. In addition to the payment of dividends in the amount of EUR 3.3 billion, financial and similar liabilities were reduced by EUR 3.1 billion. Free cash flow amounted to EUR 3.7 billion in 2021 after EUR 2.3 billion in the previous year.
Turning to our balance sheet at the end of 2021 compared with year-end 2020. Total assets increased by EUR 7.1 billion to EUR 87.4 billion. Non-current assets amounted to EUR 52.3 billion, an increase of EUR 1.9 billion, mainly due to additions to property, plant, and equipment and currency effects. Current assets increased by EUR 5.2 billion to EUR 35.1 billion, primarily due to higher inventories as a result of higher raw material prices and higher accounts receivable because of the increase in sales. Net debt decreased to EUR 14.4 billion at the end of 2021. Equity amounted to EUR 42.1 billion on December 31st, 2021, representing an increase of EUR 7.7 billion compared with the year-end of 2020.
This was driven by the considerably higher net income and other comprehensive income. The equity ratio was 48.2%, compared with 42.8% at the end of 2020. On the next slide, we give you some more explanation on our CapEx budget. Between 2022 and 2026, we plan capital expenditures of EUR 25.6 billion. CapEx in the next five years will thus be higher than the prior planning period from 2021 to 2025, with a budget of EUR 22.9 billion. The main reasons for this are our two major growth projects, the new Verbund site in Zhanjiang and our battery materials activities.
These two projects are key to drive BASF's future growth and the reason why the share of capital expenditures in the region Asia Pacific is rising to 45% of the BASF Group's CapEx between 2022 and 2026. The European share is budgeted to reach 37%, and the North American share is 15%. Investments in BASF's existing business remain stable at an average level of EUR 2.6 billion per year. We will ensure a high level of discipline regarding the CapEx required to maintain and profitably grow these businesses. This will enable us to fund the growth projects with an average of also roughly EUR 2.6 billion per year. CapEx for our growth projects will peak in 2024 and decline thereafter.
For 2022, we plan total capital expenditure of EUR 4.6 billion compared with EUR 3.4 billion in 2021. Let's now move on to BASF's priorities regarding the use of cash. BASF's corporate strategy is based on organic growth. Our annual budget for R&D activities amounts to around EUR 2.1 billion. We are committed to increasing our dividend per share every year. Our solid balance sheet and strong free cash flow support this progressive dividend policy. We strive to strengthen BASF's portfolio through smaller bolt-on acquisitions and further focus the portfolio with continued pruning measures. On January 4, 2022, we resolved on the share buyback program, our first since 2008. We have prepared an additional slide on the program. The program resolved and announced on January 4 amounts to up to EUR 3 billion.
We started it on January 11, 2022, and it will be concluded by December 31st, 2023 at the latest, subject to renewed authorization to repurchase own shares by the annual shareholders meeting on April 29 of this year. The repurchased shares will be canceled, reducing the share capital accordingly. As of February 23rd, we have already bought back 6.2 million shares for a total amount of EUR 415 million. This illustrates the program is being swiftly executed. With that, back to you, Martin, for the outlook.
Yeah, ladies and gentlemen, I'm happy to tell you that we had a very strong start to the year, with January figures above the prior year month. The macroeconomic environment that is the basis for our full year outlook also looks positive from today's point of view. We are confident regarding our business development in 2022. With 3.8%, we expect global economic growth to be somewhat moderate, more moderate in 2022, following the very strong recovery in 2021. As order books, backlogs in the industry are high, we expect global industrial production to grow by 3.8% and chemical production by 3.5%. We anticipate an average oil price of $75 per barrel of Brent crude and an exchange rate of $1.15 US dollars per Euro.
Based on these assumptions, we are forecasting sales of between EUR 74 billion and EUR 77 billion for 2022. The BASF Group's EBIT before special items is expected to be between EUR 6.6 billion and EUR 7.2 billion, and ROCE should be between 11.4% and 12.6%. We expect our CO2 emissions to be between 19.6 million metric tons and 20.6 million metric tons in 2022. No forecast has been made for accelerator sales as we already have achieved our target and plan to update our portfolio steering target in the course of 2022. Our forecast ranges take into account uncertainty resulting particularly from the effects of ongoing supply chain disruptions, the further course of the corona pandemic, and the development of energy prices.
The impact of the escalation of the Ukraine conflict is not factored in and cannot be reliably predicted at this time. However, the war in Ukraine has the potential to significantly reduce growth of global GDP and industrial production. Ladies and gentlemen, to conclude, I will highlight our focus areas for 2022. We will focus on improving the performance of our downstream business. Price increases to restore and expand our margins are the key measure in our downstream businesses to compensate for higher raw materials and energy prices. Furthermore, we will work on maintaining the strong margins in our upstream business for as long as possible. To support future profitable growth of BASF, we will continue to execute our two major growth projects, the Zhanjiang Verbund site and our battery material activities.
We will remain disciplined regarding investments and costs, and we will put even more emphasis on effective project execution across our organization. Finally, we will vigorously prepare BASF for a low carbon and circular economy. We will present the latest information on our progress towards net-zero CO2 emissions by 2050 at a virtual investor update on March 28. Now we are glad to take your questions.
Ladies and gentlemen, I would now like to open the call for your questions. Anyone who wishes to ask a question may press star followed by one on their touch-tone telephone. For the best sound quality, we kindly ask you to be sure to unmute your phone and use your headset when asking your question. Since we already have a number of analysts, 14, that want to ask questions, I would ask you to limit your questions to only two, ideally only one at a time, so that everybody has a chance to ask them. The first question is now from Christian Faitz, Kepler Cheuvreux. Please go ahead, Christian.
Thanks, Stephanie. Good morning, everyone. I'll stick to one question. Can you remind us of your exposure into Russia and the Ukraine for the group and also in particular for your Agricultural Solutions division, which I would believe is relatively higher versus other segments of the group? Thank you.
Yeah, Christian, it's roughly 1% of our sales in Russia and 0.2% in Ukraine, which more or less translates into about EUR 800 million sales in Russia and EUR 150 million in Ukraine. Whereas the distribution among the businesses in Russia is more equal, there's a high share of agriculture, but also from all the other divisions, it is much more significantly inclined towards Agricultural Solutions business in the Ukraine, which is about two-thirds of it. That is roughly the situation. You see the size of the markets are not so big.
Okay, thank you. Thank you very much, Martin.
The next question is from Andrew Stott, UBS. Your turn, Andrew.
Oh, thanks, Stephanie. Good morning. Yeah, my question was really the midterm return on capital. You've kindly given the split by division, and it just strikes me that, and I suppose we knew this from last September, but the confirmation is there that you're spending almost 20% of your group CapEx on Surface Technologies and obviously battery materials mainly. The return on capital in 2021 was 5.6%. I've got two questions on this. One, what was the underlying return on capital? Because I assume there's a lot of goodwill in there for Chemetall, Shanshan , and maybe other things. I'm trying to get an idea of, you know, the incremental return on capital as we go forward.
More importantly, what are the levers for improving that return on capital given the amount of CapEx you're committing to that division? Thank you.
Yeah. Good morning, Andrew. This is Hans. As you rightfully point out, Surface Technologies has a relatively low return on capital. What is that driven by? That's driven by primarily the two major acquisitions that we did in that segment. One back in 2006, the Engelhard acquisition, and then in 2015, if I recall correctly, the acquisition of Chemetall, both came with significant amount of goodwill. As you know, under IFRS rules, you don't depreciate the goodwill. Now, when we look at the investments that we are making or that we are now forecasting in that area, this is organic growth.
This is, in particular, the two battery material plants in Europe with a significant capital expenditure, in particular in 2022. Then the startup in 2022. For these kind of investments, you will see returns obviously in the range of what we expect for the BASF Group, i.e., earning a premium on our cost of capital.
Thank you.
Metal, if I may add the 16. Yeah. 2006. Press one, yeah. Sorry. Everybody has it. The next question will be from Matthew Yates. We will then have Tony Jones, and then Mubasher Chaudhry. Now it's Matthew Yates, Bank of America. Please go ahead.
Hi. Thank you. Good morning, everyone. I'd like to focus a bit on slide 20 and your statement that one of the priorities for this year is to improve the downstream performance. I have a couple of questions relating to the culture and the organization of the model of the group in trying to achieve that. The first one is that you recently announced some reshuffling of the divisional responsibilities within the executive team. I think your leader in ag moved to materials and vice versa. I know that's normal course of business for BASF, but can you explain or remind us why you think that model is best practice to move around the management team? 'Cause I think your U.S. peers would probably argue that these different businesses have very different skill sets.
The second question is, obviously the numbers this morning, there was a lot of impact from the booking of bonuses, at least relative to what consensus expected. I just had a general question, and that is if I am working in, say, the agriculture or the nutrition division, how much of my bonus at the end of the year reflects the performance of myself and the division I work in versus the overall BASF group? Thank you.
Matthew, first of all, on the downstream performance, you can absolutely be sure that there is a lot of pressure on the downstream divisions to increase their margins to pass over the raw materials and the energy costs. Believe me, in December, we have ourselves be a little bit disappointed about the final December result, which then impacted also Q4 because you saw also that there was quite a spike in energy costs, I have to say, even maybe the last two weeks of that month. It was not possible to pass over all that cost in the downstream area, and this is also why they came in a little bit lower, and we said the group may be a little bit lower than some of you have obviously expected.
You see also from my comment, and that's why I have given it, that January was so strong, that you can see from that we are not tired to pass on the cost increases and raise prices, and it actually happened fairly well in January, and I have to say also so far in February. You know that the business models are different downstream than upstream. Upstream, you have formula prices, and so something translates from Friday to next Monday to a higher price. If you are downstream, you have partially monthly, quarterly, half year prices, and in the extreme case, also full year prices. You cannot correct that all the time, and this is why it just takes longer.
I think with the energy prices, which we have now to expect from the current situation, the pressure on downstream business is not going away, and be sure we are sitting on their necks to continue to increase prices. You referred to the change which we have done in the Board responsibilities between Chemicals, Materials on one hand and Nutrition & Care and ag on the other side. I think first of all, we have to differentiate between the Board and also the operating division head, and the division heads are far, far longer in their business, normally five years and longer. That is also what we want to have, that they are in the details, that are very responsible for their actions. This is also going to continue because we don't have many, any changes here.
On the other hand, we have made the change in this case between the operational responsibilities here for the segments between Saori and Mike. For one, for the reason that also Mike in the past was himself in the agricultural business and also you know that we have also said this, that we want to increase the performance in ag quite significantly now. Also the major markets are here, the U.S. and South America, and Mike is over there. This is why we said we can also draw synergies from that he can actually take the direct transmission into these markets by being in the U.S. With the bonus impact, I think I mentioned that this is actually a formula where things multiply themselves.
The first one is actually the group ROCE, which defines a certain amount or a factor which is multiplied with the target bonus. This is kind of a Verbund reflection. Then beyond that there's a second factor which is relating to your personal target agreement, which is nothing else than the value driver tree brought down to each and every one where the lever is. This is usually also quite ambitious target. You see that this is, I think, a rather fair distribution on one hand of the Verbund and the group part, and then on the other hand, with the same kind of multiplier for the personal performance. I hope that answers your question.
Thank you very much, Martin.
Now it's Tony Jones, Redburn.
Yes. Good morning, everybody. Thanks for taking my questions. I've got two. You're guiding for oil to be $75 over this year. I was curious just to sort of link that to guidance. Is that what you would expect to need together with much lower gas prices to reach your EBIT targets? Secondly, on the excellence program, thanks for the update, but could you remind us if there are any further gains to come in 2022, 2023? If so, will that be enough to offset things like wage inflation? Thank you.
Tony, this is Hans. I'll take your second question first. The excellence program came to an end, so to say, in 2021. We have reached the full impact of EUR 2 billion. Is there more to come from that program in the following years? No, there's not more to come. As I mentioned, there are further excellence programs. There's one in our Global Business Services division. There's one in our Global Digital Services division, both targeting EUR 200 million earnings improvement from 2023 on. Rest assured, we don't sit back and sit on our hands. We keep moving and keep pushing BASF in the right direction. Your second question was on the oil price of $75.
That is what our full year assumption is. I'm fully aware of the fact that today we sit at $100 per barrel Brent. What this will lead to is what Martin alluded to. We need to push obviously for further price increases. We haven't built in any fluff or anything in our budgets. We are fully committed to reach, even in an oil price environment of $75 or a higher gas price environment, what we have budgeted for and what we are guiding for.
Thank you.
A small addition also, because I talked only about the downstream margin and the prices. There's definitely also a lot going on in the cost side. Not only that we get on a corporate level there from the Global Business Services and from Global Digital Services, some significant savings. Also, all the divisions are looking into their cost structure and complexity. I think you have seen in recent months that we have also sold quite some of the sites and also cleaned up further our portfolio in terms of active portfolio management. This is going through all the portfolio, and this will also help us to contain on the cost side while we increase margins.
Thank you. That's appreciated.
Okay, now we have from Citi, Mubasher Chaudhry. Please go ahead.
Hi, thank you for taking my question. Just on the balance sheet, please, can you please comment on your targeted net debt to EBITDA ratios, given the increased shareholder returns and the increased CapEx numbers that we're talking about? Given the potentially weaker performance, just wanted to hear your thoughts on whether BASF is able to balance the books on an organic basis, going forward. Just related to that, when you talk about the CapEx forecast, could you provide some comment on the impact of inflation, please? What portion of the CapEx has been fixed and kind of what portion could move up as given the costs are rising across the spectrum? Thank you.
Yeah, Mubasher, this is Hans. Thanks for your question. First on debt development, we've reduced debt in the year 2021 to a level of net debt of EUR 14.3 billion. We are fully committed to a single A rating, and that is what we will also deliver on. On our CapEx forecast, now fixing elements in a five-year CapEx forecast is relatively difficult. If you look at price developments that are relevant for our CapEx projects, such as, for example, the price of steel, we've seen that at very elevated levels during the course of 2021.
It has come down, I think by roundabout 20% compared to the peak that we had in 2021. You see also other key building material prices coming down, while on the same side you see labor costs increasing in the current environment. What we'll do there needs to be very carefully monitored. I think this is anyhow a task that we all have day in and day out.
Understood. Thank you.
Given that there are still nine analysts in the line wanting to ask a question, I would really urge you to ask only one question. We will now have Chris, Gunther Zechmann, then Laurent Favre, and then Peter Clark. Now Gunther Zechmann, Bernstein.
Thank you. Good morning, everyone. My one question is, I was intrigued by your comments in the remarks to force possibly an IPO of the Wintershall Dea business in 2023. Can you talk us through how exactly that would work, please?
This is Hans again, Gunther. Let me put it this way. Is this something that we want to do and that we intend to do? No. Is that an option that we have? Yes, it is an option that we have, and the technicalities of that are as you would expect it for a unilateral IPO.
Okay. Now we have Laurent Favre, BNP Paribas. It's Favre.
Thank you. Thanks, Stephanie. It's a question for Martin. Since Q3, you announced a strategic review on the automotive catalysts business and the EUR 3 billion buyback program, which referred to history when you did about EUR 10 billion of buybacks on a multi-year basis. I was wondering if we should assume that the EUR 3 billion program you've just started is a one-off, or should we see this more as an intention of, well, I guess, repeating what you did or what BASF did, you know, 15 or 20 years ago? Are you considering further portfolio reviews that could help fund the buyback but also sharpen the focus, especially in the downstream? Thank you.
Thank you for this question. Yes, I think we referred also to that this is in principle, not a new instrument for BASF. We have practiced for a long time and actually bought back almost, I think, 30% of our shares for EUR 9.9 billion. I have to say, and I think we share that all, we as management team have been frustrated about the share price development. We regard us as dramatically undervalued, and this is also why we set a very clear signal that we have full confidence in the company, and we have very clear plans how to develop. We have given out financial targets in 2018, and we stand firmly to this, but we don't see them reflected in the share price.
That is also why we then, at the beginning of the year, and I think it was to all of you a surprise somehow, but also with a positive comment, and I think also the performance of the share, I think, compared with the chemicals index but also with stocks and oil stocks, it was actually a very good performance so far. I think that reflects what we want to do. You know basically our plans and, I mean, when it comes to portfolio measures, I think we have been fairly active over the recent two, three years.
Now we have also some activity which is the carve-out of the automotive catalyst business, which is not a decision to sell this business, but to put it into the right operational independence and strength for the team to get the maximum out of that business in a totally different environment now for the automotive industry. I would say beyond that, we don't have now a big thing in front of us. I mean, what I said, there is quite a lot of work in the smaller parts, where we take sites out and reduce structures. There is nothing which I could mention now, where I have to say we have a bigger portfolio piece ahead of us because we are now fully focused.
You know these projects, which are the organic growth projects. We fully stand behind that, and I think both for China but also for the battery materials, the expectations in these businesses are good. That means also, I would say even very good, but we have to also put now some steel and iron into ground to participate in this.
Thank you. A quick one for Hans, please. About the constraints you have with Wintershall Dea and LetterOne, I was a bit surprised that the dividend of Wintershall Dea would only be flat, given the strength in the market. Are you also constrained in your ability to grow the dividend and turn the free cash flow into a dividend for BASF?
Now, as you have seen, Wintershall Dea is paying a common dividend of EUR 600 million. It remains to be seen whether that is the end of the flagpole for the year 2022.
Thank you, Hans.
Now we move on to Peter Clark, Société Générale. We will then have Jaideep Pandya and then Chetan Udeshi.
Yes. Good morning.
Now, Peter Clark.
Yeah. Good morning. Thank you. I asked this on Q3, but I got cut off. It was about the pressure on the downstream that you talk about not going away. And specifically on something like coatings, which looks like it's fallen into deeper loss in the fourth quarter. You pushed price 4%. It's clearly not enough. You made that quite clear. There's a lag effect. Just wondering when you see that business turn back positive and certainly when the pricing catches up with the costs. It sounds like it might be more a second half effect, I think, in that business. Just a quick follow on that, the resistance from customers. Have you noticed any change in the customer reaction to the price increases as we've gone through the fourth quarter into the first quarter? Thank you. That's general. It's not just coatings. Thank you.
Peter, I mean, there's most probably no other businesses more directly related to automotive than coatings because you can build a car without a seat, but you cannot build a car without coating it. That means the coating business immediately reacts when they reduce the number of cars produced. That was also the topic for the coatings business last year when the numbers actually went down significantly. They certainly had much less, and they had also short work schemes and whatever. I mean, you know that in the past. Now what you have seen is that actually there was an uptick because Q4 was for the automotive industry in volumes better than anticipated, so that also immediately was shown in the coatings business.
I would say it strongly depends what really the final number of cars produced is here. Let me very clearly say they are extremely pushy and successful in reducing costs. Over many years, they really go down this complexity with number of people, and they work on that. I have also to say that is an area where price increases are not easy. If you have an OEM who produces not so many cars, you don't have an open door now to say you increase your prices dramatically. Certainly they have to go much more their way because raw material price increases are not fully covered yet with the coatings.
They are on it, and I would expect, when the number of cars really going up and semiconductor shortage eases a little bit, they will have also the power to increase prices even further.
Thank you. A general question about price passing, pricing resistance. No change in behavior from the customer generally?
Yeah, I mean, general remark. I mean, you can imagine that customers are not amused. We are already on very high price levels throughout the portfolio, I have to clearly say this. Definitely also not enough in all the business to cover with the costs. They are aware of that, but with each level higher in the prices, the resistance also goes up. At the very end, it's then also a question of a power balance because I think they have partially full order books. They need also the materials. You know that some of the materials are short, not only because of supply chain. I mean, if you look at the number of ships waiting, it has not dramatically reduced congestion to get containers, and the price, and everything is not easy.
Raw materials are partly short, so we still have a lot of allocations, actually in some of the lines. I think this balance between their demand and our supply capability, that gives you also the power then of pricing. I would say it has become more difficult, but our people are firm on that and they get our pressure in doing that. I would say so far it's still working.
Thank you very much.
Okay, now we move on to Jaideep Pandya On Field Investment Research .
Thanks. My question is on ag. In 2019, you guys gave a guidance on ag for roughly 23% margin. In the last couple of years, obviously this business has gone significantly backwards. When I think about the mix, I mean, your fungicide sales have gone up by about 20%, 2021 versus 2019. You obviously have got Nunhems, you know, vegetable seeds, and other seeds business. Then R&D costs are also roughly flat. I appreciate the whole bonus reshuffling thing, but underlying what is really going on in ag? Then are you still sticking to the 23% margin guidance, despite the whole bonus reshuffling? That's my first question. The second question really is around your nickel and cobalt sourcing, because obviously you have a relationship with Norilsk Nickel.
In the current geopolitical context, what is the plan B if really there are hard sanctions around trade agreements between Russia and Europe? Thanks a lot.
Yeah, Jaideep, this is Hans on your ag question. If you look at the year 2021, some of the factors that drive the margin below what used to be the target and what continues to be the target is, as you mentioned it, is the higher personnel cost that's coming via the bonus. We have significant cost increases also in all other categories. When you compare to these significant cost increases, what we were able to push through as price increase, that was just not significant. It reduces the contribution margin by roughly five percentage points.
When you look at this goes all the way through to the EBITDA level and also the EBIT level. There's also another component in there that you will not see the same way with the U.S. competitors, which is the impact that currency has in the year 2021. There's about, let me say somewhere in the order of magnitude of EUR 100-150 million also sitting in a currency effect that a U.S. competitor would not show the same way because the US dollar compared to the Euro on average in 2021 was significantly weaker than in the year 2020.
As Martin has stated before, this is certainly not the kind of performance that we want to deliver with our business, and I'm pretty sure that we will significantly improve performance in the year 2022.
Jaideep, a word on the raw material supply. I mean, you're referring to Norilsk Nickel, which is actually our supplier in the batteries value chain also in Europe, because the Harjavalta plant is actually directly adjacent to the metal refinery over there. We have a long-term market-based supply agreement for these materials, so nickel and cobalt with them. But let me also very clearly say we have a long-standing relationship with them when it comes to precious metals, particularly palladium for our automotive catalysts division. That is a very reliable partner.
I mean, given the power and the pressure the EU Commission puts now on bringing the combustion engine into a decline and actually moving on with the EVs, Norilsk Nickel is one of the very strong, if not the only significant European nickel and cobalt supplier. I don't think we don't know that yet, but I don't expect that this is part of the sanctions package. Let's see. For that reason, we go with them. You know also that we have a much more sophisticated raw material supply network built up. First of all, with our acquisition in Shanshan, we have access also to nickel and cobalt suppliers over there. You know that we also work with Eramet in another project there for tapping into the Indonesian resources.
If something would happen there, we have to reshuffle and use the network globally, which we have established for the raw materials. I would expect that this is something we have to observe a little bit. It's just very hard to give more comments in the first day after the conflict now escalated.
Thanks a lot. If I may just say, it would really be good if you could increase the focus a little bit on ag in the communication as well. Thanks a lot.
Good hint, because it doesn't lack on the pressure they feel in their neck from Hans and myself.
Okay, now we move on to Chetan Udeshi. We will then have Sebastian Bray, Andreas Heine and Markus Mayer. Now Chetan Udeshi, please.
Yeah. Hi, thank you. You know, just following on previous question also prior to that, I'm just doing my math here, maybe I'm wrong, but hoping I'm correct. Nutrition & Care EBIT in 2021 is about 37% below 2019. Ag EBIT, 35%. I mean, I haven't seen any of your peers. You know, yes, you know, there are not always pure peers in the industry, but I mean, so far as I've seen, 2021 numbers for most of your peers, closest peers in these markets have been clearly well above 2021, sorry, 2019 levels, even with raw material pressures. Now I understand, you know, the cost dynamics, which are somehow different at BASF because of the immediate pass through of costs, et cetera, et cetera.
My question is, you know, we hear you when you say, okay, there is a pressure on the teams, and we've been hearing that for all of 2021. Are you able to commit today that, you know, in 2022, at least we should expect the earnings in these divisions to go back to 2019 levels? Because 2019 itself was actually lower than the prior years in both these divisions. I'm just wanting to see or get some more conviction in terms of how you think 2022 play out for these two divisions. Just one follow-up, small one. In your return on capital employed calculation, I'm just curious, why do you not include the costs in the other line, which is quite significant?
You know, we are talking about EUR 700 million of costs, so why is that excluded from ROCE calculation? Because that probably would dilute your ROCE by 100-250 basis points. Thank you.
Chetan, as you know, ROCE calculations are done in different ways. We do a ROCE calculation on the basis of our operating assets and our operating results. In the target, we then include an adder of one percentage point, and that covers what we have in the other line. I need to run the calculation myself. Haven't done that because we're using this operating ROCE or operative ROCE model for more than a decade. Need to run that calculation myself, but I would doubt that we will find a significant dilution there.
Chetan, I can only say, I mean, as I already alluded to, we have enormous pressure on the downstream business to improve their margins. I have also to say, I mean, if you look for purely the energy cost and also the chart we have released, I mean, they're running uphill. I mean, they're, it's continuously going the energy price up, and they run and put it on. They could not really pass it over. I think if you look also in the situation, we have given you some background here also in the nutrition business where we had a fundamental problem with our vitamin A volumes, which are now coming back. We are there.
You see also from information we gave you on the segments with the price increases, that was the rather soft one here, whereas all the other segments have dramatically increased prices. They just have not yet done fully their job. If you look on the ag part, I mean, they had a fantastic volume growth. It was actually 8.1% for the full year in ag, but not so much yet on the prices. They have also to dramatically increase prices over there. We have had a mix.
Let me also say we have been significantly hit also by FX because we are the only one who's reporting here in euro numbers, where the others do in US dollars, and we had quite a strong headwind both in the real and also the US dollar, which is no excuse but which has hit us. I can only say, yes, you make some mathematics now. I cannot promise you where it is. I tell you we will get the maximum out of this business in 2022, and certainly we have to come back to these kind of levels which you just described.
Thank you.
Now it's Sebastian Bray, Berenberg. Please go ahead.
Hello, good morning, and thank you for taking my question. I'd like to focus on the upstream, please, and in particular why the Materials segment had such a contrasting development versus the Chemicals segment, Materials being substantially below market expectations and Chemicals slightly above. In both cases, higher raw materials and higher bonus provisions are cited. There seems to be in the release a bigger emphasis on higher fixed cost in Materials. Given these are effectively both upstream petrochemicals businesses, what is the reason why Materials seems to have had a much harder time in Q4 than the Chemicals segment? And would you expect this to continue into 2022? Thank you.
First thing I would like to make, you make always a very black and white distinction that both chemicals and materials are upstream. I mean, we have to clearly say that MDI Monomers division is clearly upstream, but the performance materials division is actually downstream. We have a full value chain here. This segment is a little bit different than really the Chemicals divisions, which is fully upstream. What you can actually see is that the raw material side. That means the commodities on the isocyanates basically and also the materials for the polyamides have done extremely well. Actually, also across the year, ammonia, which is one of the materials, has done extremely well.
Where we had more topics was really on the downstream part in this case as well, because the Performance Materials had lower volumes, which came from the automotive industry. You know that this is a significant outlet over there, but also the construction industries across the globe did not do so well. Also because of the models which we have said they had not done fully their job on the price increases. If you look on Materials, be really aware that is the full value chain and not only upstream logic, whereas Chemicals really is upstream business. This is also why with this what I explained, it's a little bit different performance here.
That's helpful. Thank you. Is it just fair to say that you charged or BASF charged the Performance Materials business more for the isocyanates monomers and the caprolactam, and it got internally squeezed, but that hasn't shown up in previous quarters. It's entirely a lag effect on downstream why Materials is different from Chemicals in terms of development, or?
Yes, Sebastian. This is always what we say. We certainly want to have the full earnings on the whole value chain. The upstream business is simple. In the internal transfer price, they just hand over from Friday to Monday the price increase, which they also give to the external customers. Then the higher raw material cost is with the Performance Materials, and they have to hand it over to their customers. They get squeezed with increasing raw materials and energy prices. That's the same logic to these customers as we are with the outside customers. That's why they need then a little bit more time to pass that on.
You know also then when the raw material prices go down, they also get from Friday to Monday a lower price while their sales prices are going down later. They have an extension of the margin. It is this logic which we explained also several times already, which in this case applies within the Materials segment.
That's helpful. Thank you for taking my question.
Okay, now Andreas Heine, Stifel, and then we will have a final question from Markus Mayer. Now Andreas Heine, please.
It's again on the Nutrition & Care business. It was not great in performance over recent years and it cannot be only the Vitamin A plant and the pricing. Is there anything else you have to change? As we look on peers which live obviously on the same planet and have the same issue with energy prices and raw material costs, there the margin actually improved during this year and was not down. Why is that different, not only in 2021 but also in the year before? Cannot be only the Vitamin A plant.
Hi, Andreas. This is Hans. Vitamin A plays in that segment an important role due to volume and the position that it has. We have in addition to that the expansion actually of the vitamin A plant and the cost that comes with it, and we have the expansion of the formulation plant and the cost that comes with that, and that hits an operating division that is relatively small. These two effects explain pretty much what happened in the Nutrition & Health business. In the Care Chemicals business, we had, if you think back to the year 2020, very strong results.
There, I think we talked about that also in prior calls. There are in particular two areas which suffered in the year 2021. Both are actually, you wanna say, leisure or travel related. One is the UV filter business, which is an important part of our Care Chemicals business, and the other is also in Care Chemicals, active ingredients for high-end cosmetics. A lot of that business simply has to do with people traveling more or less, and in 2021, we saw people, for obvious reasons, traveling less. By the way, that has picked up in the meantime, so our customers seem to have worked through their inventories of UV filters.
Where we had very, very slow business during the course of 2021, it has now picked up again.
It's the high margin area.
Hope that helps.
Yeah. Thanks.
Markus Mayer, Baader Helvea.
Yeah. Good morning, Stephanie, Martin, and Hans. My question is basically on the free cash flow. Can you remind us how much of the free cash flow came from Wintershall Dea? In the past, before this business was then combined with DEA and also deconsolidated in the core business units, you also had oil and gas in the dividend analysis. Maybe now it would be helpful if you could give this, at least a kind of flavor how much oil and gas in the dividend would mean for your cash flow from Wintershall, coming from Wintershall Dea. Thank you.
On the free cash side, that is relatively simple because that is the dividend that we are receiving from Wintershall Dea. On the oil price sensitivity, we will have to provide that to you after the call. I don't have that figure handy at this point in time.
Okay.
Hope that's okay.
Sure. Of course. Thank you.
We'll put that in the transcript then. I hand back to Martin.
Yeah. Thank you very much. Maybe at the end, I would just give a more, two, three more sentences. I mean, first of all, I thank you for the variety of questions and not only focusing on Wintershall Dea, which is clearly now something everyone thinks of, but I'm happy that you reflected that BASF is certainly much more than that. I hope we could really convey we are positive about this year. Yes, there are uncertainty now what Wintershall Dea and the Russian thing and what that all means for us and for the world. I would say overall, the fundamentals for 2022 are good. There is backlog in demand of people.
There is sound demand as we can see, at least for the first half year, as long as we can see there's actually no business where this is falling off the cliff for us, anything changing significantly. We also hope then in the second half that automotive is actually getting better, so the business conditions are good. We told you that Russia and Ukraine is not really big markets for us, and I think for many other companies this is the same. If there are something directly connected to sanctions, I think it's not this direct market thing, which is I think something we have to observe is then the energy costs that under these circumstances rather maybe stay on the higher side.
If Europe buys a lot of LNG, most probably the energy prices also stay high in Asia. What is then the impact on consumption? What is this real income and are getting people a little bit more cautious in spending? But I would all regard that not so dramatically that that has now potential to derail everything. I just want to say we expect now a very strong quarter one. Orders are fine. Orders at hand are fine. Order entry is fine. I just would like to really close here on a positive note. You know that visibility is always giving us quarter one, quarter two, but then let's see, and I think the further we go into the year, we will then have more sight into the second half, and then we will update.
I think, overall, this should be a good year.
Ladies and gentlemen, this brings us to the end of our conference call. Let me invite you to join our virtual investor update on Monday, March 28. As Martin Brudermüller mentioned already, we will present further details on BASF's journey to Net Zero 2050. The webcast is scheduled to begin at 2:00 P.M., Central European Time. Around one month later, on April 29, we will report on BASF's first quarter results and offer our virtual annual shareholders meeting. Should you have any further questions regarding our full year reporting, please do not hesitate to contact the IR team. Thank you very much for joining us, and goodbye for now.