Ladies and gentlemen, thank you for standing by. My name is Emma, your Chorus Call operator. Welcome and thank you for joining the BASF Conference Call on the Restated Figures 2018 2017. 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.
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 on Pages 123 to 130 of the BASF Report 2018. BASF does not assume any obligation to update the forward looking statements contained in this presentation above and beyond the legal requirements. And I would now like to turn the conference over to Stefanie Wettbeck, Head of Investor Relations. Please go ahead.
Good morning, ladies and gentlemen. On behalf of BASF, I would like to welcome you to our conference call. Along with today's publication of our restated figures 2018 2017, we would like to give you the opportunity to ask questions you might have regarding our new segment structure or the reporting of the Oil and Gas business. On the call with me today is Hans Ulrich Engel, BASF's Chief Financial Officer. He will give a short presentation and is then happy to take your questions.
Please be aware that we have already posted the slides on our website atbrzf.com/share. With this, I would like to hand things over to Hans.
Yes. Thank you, Stefanie. Good morning, ladies and gentlemen, and thank you for joining us. Today, we provide you with the restated figures for 2018 2017, reflecting our new segment structure. Please note that BASF Group Financials, such as the statement of income, balance sheet statement of cash flows, are not affected by the restatement.
As of January 1, 2019, BASF's businesses are grouped into 6 segments: Chemicals, Materials, Industrial Solutions, Surface Technologies, Nutrition and Care and Agricultural Solutions. BASF's new segment structure increases transparency regarding the results of our segments. Furthermore, it highlights the importance of our integrated value chain approach. BASF Sabund remains core to our activities and provides many synergies. On Slide 4, you can also see how the various parts of our portfolio are connected.
Catalysis is, for example, a core technology in the chemical industry that is fundamental to more than 90% of our production. We have unique formulation know how that is used in many businesses and allows us to support customers in a targeted manner. Biosciences and the markets for nutritional products connect our Nutrition and Care and Agricultural Solutions segments. In many cases, different businesses supply the same customer industry. The most prominent example is the automotive industry.
By combining the expertise and experience of each business, we can offer better solutions to our customers. Our new segments are based on business models reflecting the division's focal points, their customer groups, their innovation focus, their investment relevance and sustainability aspects. For the development of each segment, we set distinct road maps. Capital will be allocated in a very focused manner according to the specific requirements of the segment. Overall, we want to make the most efficient use of our resources to generate profitable growth.
Let me now quickly walk you through each segment. The Chemicals segment, comprising the Petrochemicals and the Intermediates divisions, will remain the cornerstone of our Verbund structure. It supplies the other segments with Basic Chemicals and Intermediates contributing to the organic growth of our key value chains. Alongside internal transfers, it serves primarily the chemical and plastics industries. In this segment, we aim to increase our competitiveness through technological leadership and operational excellence.
The Materials segment consists of the Performance Materials and the Monomer divisions. The portfolio comprises advanced materials and their precursors for new applications and systems. These include isocyanates, polyamides and specialties for the plastics and plastic processing industries as well as inorganic basic products. We focus primarily on organic growth through differentiation via specific technological expertise, industry know how and customer proximity to maximize value in the isocyanate and polyamides value chains. The Industrial Solutions segment with the Dispersions and Pigments and the Performance Chemicals divisions develops and markets ingredients and additives for industrial applications such as polymer dispersions, pigments, resins, electronic materials, antioxidants and admixtures.
We aim to drive organic growth in key industries such as automotive, plastics or electronics and expand our position in value enhancing ingredients and solutions by leveraging our comprehensive industry expertise and application know how. During recent years, we completed a number of portfolio pruning measures. 1 month ago, we announced the start of the divestment process for our Global Pigment business. We are convinced that a new owner with a strong pigment focus and the willingness to invest into the business will be able to further drive profitable growth and ensure long term success of the business. The Surface Technologies segment with the Catalysts and the Coatings divisions comprises our businesses that offer chemical solutions for surfaces.
The portfolio includes products for the automotive and chemical industries such as coatings, catalysts and battery materials. The aim is to drive organic growth by leveraging our portfolio of technologies and know how and to establish BASF as a leading and innovative provider of battery materials as well. For the time being, the Construction Chemicals division is also part of the Surface Technologies segment. In October 2018, we announced plans to evaluate strategic options for our Construction Chemicals business. Currently, we are preparing the carve out of the business and are structuring the M and A process.
Our intention is to sign a transaction agreement in the course 2019. The Nutrition and Care segment comprises the Care Chemicals and the Nutrition and Health divisions. We strive to expand our position as a leading provider of nutrition and care ingredients for consumer products in the areas of nutrition, home and personal care. Customers include food and feed producers as well as the pharmaceutical, cosmetics, detergent and cleaner industries. We aim to enhance and broaden our product and technology portfolio.
Our goal is to drive organic growth by focusing on emerging markets, new business models and sustainability trends in consumer markets supported by targeted acquisitions. The Agricultural Solutions segment aims to further strengthen our market position as an integrated provider of crop protection products and seeds. Its portfolio comprises fungicides, herbicides, insecticides and biological crop protection products as well as seeds and seed treatment products. We also offer farmers digital solutions combined with practical advice. Following the integration of the assets acquired from Bayer last year, our focus is on innovation driven organic growth, targeted portfolio expansion and leveraging synergies from the acquired businesses.
In addition to the new segment structure, the composition of some divisions has also changed. The propylene oxide and propylene glycol business was transferred from the petrochemicals to the monomers division. The super absorbents business was allocated to the petrochemicals division from the Care Chemicals division. The styrene, polystyrene and styrene based foams business, which previously fell mainly under the Performance Materials division and a small part under other, were grouped together in the petrochemicals division. With the introduction of the new segment structure, we also made some changes to the items and activities reported under other.
As of January 1, 2019, discontinued operations and all remaining activities after divestitures are now reported under other. The latter includes, for example, participating interests accounting for using the equity method or supply obligations assumed in the context of divestitures. Reclassification affects the remaining activities for the Leather and Textile Chemicals business previously recorded in the Performance Products segment and the remaining activities for the Industrial Coatings business previously recorded in the Functional Materials and Solutions segment. At the end of January 2019 BASF and Solenus completed the transfer of BASF's paper and water chemicals business to Solenus. Since February 1, 2019 BASF accounts for its 49% share in Solenis using the equity method and includes its share of the company's net income in EBIT before special items of other.
The disposal gain in the order of a low triple digit €1,000,000 amount will be reported as special income in the Industrial Solutions segment in the Q1 of 2019. Slide 7 summarizes the key financials of each segment for the years 2018 and 2017. In the restatement brochure, you can find a breakdown by quarter and additional figures for assets, investments and research and development expenses by segment. As mentioned before, the Construction Chemicals division is currently reported under Surface Technologies. Once we have certainty that a transaction will take place, the division will be classified as discontinued operation until closing with sales and EBIT no longer included in BASF Group's figures.
As in the case of the oil and gas business in 2018, the construction chemicals business will then only be reported in the income after taxes from discontinued operations. The pigments business, however, will be classified as disposal group and not as a discontinued operation due to the lower relevance of this business for the BASF Group. Therefore, the pigments business will remain part of BASF Group's sales and EBIT until the transaction is closed. To remind you of the size of these businesses, in 2018, we generated sales of around €2,500,000,000 in Construction Chemicals. Sales in our pigments business amounted to around €1,000,000,000 On the following slides, I will explain the impact of the merger between Wintershall and DEA on BASF statement of income and how we will account for our share in Wintershall DEA in the future.
The signing of the agreement in September 2018 had an immediate effect on the reporting of BASF Group as the oil and gas business had to be classified as discontinued operation. Sales and earnings of the oil and gas business are no longer included in Beersatzgrupp's reporting retroactively as of January 1, 2018 and with the prior year figures restated. Until closing, which is expected in the Q2 of 2019, Earnings are presented in BASF statement of income in the line income after taxes from discontinued operations. From the transaction closing date, BASF will account for its share in the joint venture Wintershall Dea using the equity method and include its share of Wintershall Dea's net income in EBIT before special items of the BASF Group reported under other. The gain from the transition from full consolidation to the equity method will be shown in income after taxes from discontinued operations as of the closing of the transaction.
Until closing of the merger, the cash flow contributions from considered in the respective line items of BASF statement of cash flows. Thus, there is no change for the time being. From the transaction closing date, dividend payments from Wintershall Dea to BASF Group will be considered in BASF's cash flows from operating activities. As we will account for our share in the joint venture Wintershall Dea using the equity method, we have to eliminate the equity result from BASF's cash flows from operating activities. Capital expenditures of Wintershall Dea will not impact the BASF Group's cash flow statement.
And as the joint venture will finance itself on the market, the JV's financing will also not be shown in BASF Group's cash flows. This brings me to the end of my short presentation, and I'm now glad to answer your questions.
Ladies and gentlemen, I would now like to open the call And the first question is from Tony Jones, Redburn. Please go ahead.
Good morning, everybody. Tony Jones, Redburn in London. I had one on Surface Technologies. Apologies if I missed this. I joined the call very slightly late.
But the 2017 EBIT looks like it's been adjusted slightly versus previous guidance and then other has been adjusted as an offset. What's caused that change, please?
There are, Tony, few changes. And the major change that we have is the divestiture of our industrial coatings business that took place, if I recall that correctly, in Q3 or Q4 of 2017.
Okay. If I may, just one short follow-up. On Construction Chemicals and the carve out, if we end up with the transaction being a divestment, is there any view or update on what might happen to the proceeds? Thanks.
I think, Tony, that is a perfect question for a call that's focused on the restatement. And we will, 1st of all, have to come to an agreement here. I explained, and you may not have joined at that point in time where we're in the process. So we're putting together the cardboard financials. We're structuring the M and A process.
We'll approach potentially interested parties in what I would call the immediate future. And then we'll have a clearer picture and also think about what to do with the proceeds.
Okay. Thank you very much.
The next question is from Andrew Stott, UBS.
Yes. Good morning. Thanks, Debbie. Hi, Hans. So a broader question really away from the new reporting to the concept of how this has been tied in, if at all, to the new operational excellence program, to the decentralization push.
So are you, for example, changing the way you're budgeting through this new business unit structure? Is there a new incentive package if you're a senior manager, again, tied to your new business unit? Just any thoughts about what's changing internally? Or is it really just different financial reporting and we leave it at that?
I think Andrew, thanks for your question, first of all. I think at the Capital Market Day, we explained what we intend to do with BASF Group. This is a key piece here. The new segmentation that will help us and I think also in view to get a clearer view on BASF. There is significantly more transparency there.
That obviously also increases then the competitive pressure on our businesses, but we are perfectly fine with that. I think this is the right move. It comes in combination with the excellence program. You alluded to the fact that we're moving about 20,000 people that we have in what we call functions and service units closer to the businesses. We made a major step there already on January 1.
There's more to come by April 1. And then with this first wave there, we should be done by the end of 2019. So there are significant things happening as we speak in the BASF Group, all obviously part of 1 and the same strategy and thus also 1 and the same picture.
Okay. Thank you. The next question is from Andreas Heine, MainFirst.
Yes, basically 2. 1, you moved the super absorbents from one segment to the other. Does it imply anything for the how this business will be managed? Or is this just that you reallocated the business? And maybe as we are so close to the end of the quarter, if you mind adding something on what you have seen in recent weeks on the trends in the chemical markets, please?
Yes. Good morning, Andreas. First of all, your question on super absorbents. Is this just moving parts in the portfolio to move them? No, certainly not.
Super absorbents is part of the acrylic value chain. The acrylic value chain originates in our petrochemical segment. And we came to the conclusion that a value chain approach here makes a lot of sense. We've also experienced in the more recent years a commoditization of the super absorbents business. We need to run it more like a commodity or not only like, but as a commodity business.
And this is also intended with moving that business into the petrochemical segment. On Q1 and the developments there, a month ago, we had our earnings release for the full year, the analyst conference and the press conference. We already explained there what we are seeing, which is a slow start to the year 2019. Developments in Q1 are, I want to say, fully in line with our expectations. We've seen a significant decline in isocyanate prices and as a result of that also isocyanate margins.
We are experiencing and we alluded to that already also at the Analyst and the press conference a month ago, we're seeing weak not to say very weak cracker margins around the globe. Automotive is where we thought automotive would be 1st 2 months of the year. Global sales down by roughly minus 8%. China in automotive, and this is sales figures, but production figures are in the same order of magnitude based on everything that I've seen. So China down by minus 15% in the 1st 2 months of the year.
We've also seen the in the meantime, the additional announcement that were made on certain stimulus measures in China remains to be seen when and to what extent they will be implemented and what kind of an impact they will have. At this point in time, that's definitely too early to say. And I think it would be fair to say that we do not see an impact at this point in time of these stimulus measures that were announced in China. So it is the difficult economic environment that we had expected for Q1 that will most probably also then extend into Q2. In our guidance, we are expecting improvement then to come in the second half of the year.
As you recall, there are a number of things happening in the BASF portfolio that will have an impact there, such as, for example, the results of the oil and gas business being reported again in our EBIT. Once we close the transaction as already explained. We should see the benefit from the businesses that we acquired from Bayer. But all of that is fully in line with what we have explained already a month ago. And to repeat it, Q1 is as weak as we had expected.
Thank you
The next question is from Markus Mayer, Baader Helvea. Please go ahead.
Yes. Related to this question, for 3 years, that can you remind us on the cracker turnarounds in this year, do I remember correctly that from the phasing of this year, the cracker turnarounds are more in the Q2? That would be basically a add on to the question. Yes, Markus, that is perfectly correct. We have the heavy load of the cracker turnarounds in Q2 and then also impact still in Q3, but these are the quarters that will be affected by the cracker turnarounds.
Perfect. Thank you so much.
At this time, there are no further questions. So this brings us to the end of our very short conference call today. We hope you will now be able to swiftly adapt your models before our Q1 2019 reporting on Friday, May 3. The conference call will take place at 8:30 Central European Summer Time, right before our Annual Shareholders Meeting. Should you have any further questions at this time, please do not hesitate to contact a member of the BASF IR team before our quiet period begins on April 1.
Thank you for joining us today, and goodbye for now.
Ladies and gentlemen, the conference has now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.