BASF Report 2021 Management’s Report – Financial Position 65 Financing instruments Statement of cash flows for property, plant and equipment and intangible assets also con- Million € tributed to the decrease in cash flows from investing activities. 248 Cash flows from operating activities amounted to €7,245 million, Commercial paper compared with €5,413 million in the previous year. The considerable Cash flows from financing activities amounted to –€6,457 million. increase was primarily due to the improvement in net income, which In addition to the payment of dividends in the amount of €3,312 mil- 3,447 had included high impairments in the previous year. Accordingly, lion (2020: €3,139 million), financial and similar liabilities were 13,489 depreciation and amortization of property, plant and equipment and reduced by €3,145 million. Liabilities to banks €17,184 million Bonds and other liabilities to the capital market intangible assets was significantly below the prior-year figure in 2021, at €3,687 million. An offsetting factor was cash tied up in net Free cash flow, which remains after deducting payments made for working capital, which rose by €1,166 million to €1,566 million in property, plant and equipment and intangible assets from cash 2021. This mainly resulted from the significant increase in inventories flows from operating activities, represents the financial resources by €3,304 million due to higher business volumes and prices after a remaining after investments. It amounted to €3,713 million in 2021, BASF Group’s most important financial contracts contain no side reduction in inventories had supported operating cash flows in the after €2,284 million in the previous year. agreements with regard to specific financial ratios (financial cove- previous year. nants) or compliance with a specific rating (rating trigger). Cash of €1,272 million was tied up in receivables, €904 million less To minimize risks and leverage internal optimization potential within than in the prior year. The improvement was due in particular to the the Group, we bundle the financing, financial investments and reduction in precious metal trading exposures. Trade accounts foreign currency hedging of BASF SE’s subsidiaries within the receivable rose by €1,799 million, €805 million more than in the BASF Group where possible. Foreign currency risks are primarily previous year. By contrast, the €3,010 million rise in liabilities hedged centrally using derivative financial instruments in the market. increased operating cash flows. This was largely attributable to the increase in trade accounts payable and current provisions. This Our interest risk management generally pursues the goal of reducing effect was less pronounced in the previous year at €927 million. interest expenses for the BASF Group and limiting interest risks. Interest rate hedging transactions are therefore conducted with Miscellaneous items led to cash tied up of €398 million in 2021, after banks in order to turn selected liabilities to the capital market from cash released of €122 million in the previous year. This was due in fixed to variable interest rates or vice versa. particular to the elimination of equity-accounted income and the For more information on the financing tools and hedging instruments used, see Note 21 from reclassification of income from divestitures, including the gain on the page 251 onward and Note 26 from page 263 onward in the Notes to the Consolidated Financial disposal of the shareholding in Solenis, to cash flows from investing Statements activities. Cash flows from investing activities totaled –€2,622 million in 2021, after –€1,904 million 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. By contrast, payments made for acquisitions amounted to €600 million in 2021, around half the prior-year figure. The €403 million increase in payments made