Homepage  Homepage     Search on site  Search on site     To write the letter  To write the letter     Site map  Site map
Agro Perspectiva
We are on: 
   
 


Home > News

BASF Group sales slightly lower in second quarter

25.07.2019 09:25 "Agro Perspectiva" (Kyiv) — Sales of ˆ15.2 billion (minus 4%)

EBITDA before special items of ˆ2 billion (minus 27%)

EBIT before special items of ˆ1 billion (minus 47%)

Net income of ˆ6.5 billion resulting from deconsolidation of Wintershall (plus ˆ5 billion compared with second quarter 2018)

Brudermüller: «BASF is implementing strategic growth initiatives rapidly, thoroughly and rigorously.»

The macroeconomic environment became challenging for BASF in the second quarter of 2019. «There is currently high uncertainty, low visibility and poor predictability,» said Dr. Martin Brudermüller, Chairman of the Board of Executive Directors of BASF SE, during a conference call. «Our second-quarter results clearly reflect this.»

Compared with the second quarter of the previous year, sales decreased by 4% to ˆ15.2 billion. Prices were down by 2%, mainly driven by the isocyanates and cracker products businesses. Sales volumes declined by 6%. All segments recorded lower volumes, except for Nutrition & Care. The decline was most pronounced in the Chemicals and Agricultural Solutions segments. The reasons for this were the scheduled steam cracker turnarounds in Antwerp, Belgium, and Port Arthur, Texas, as well as the unfavorable weather conditions in North America affecting the Agricultural Solutions segment. Portfolio effects accounted for plus 2% thanks to the seeds and non-selective herbicide businesses acquired from Bayer. Currency effects amounted to plus 2%.

EBITDA before special items decreased by 27% to ˆ2 billion. EBIT before special items came in at ˆ1 billion, 47% lower than in the prior-year period.

The global trade conflicts, particularly between the United States and China, are a serious concern for the company. «We followed the general assessment that a solution would be found by the middle of the year. But now it seems the situation will not ease for some time,» said Brudermüller. BASF already published its key figures in an ad-hoc release on July 8. The company’s 2019 outlook presented in February of this year was based on certain macroeconomic and geopolitical assumptions. «Unfortunately, many of these did not materialize and we therefore had to lower our outlook,» said Brudermüller. He added that the adjusted outlook would not change BASF’s progressive dividend policy: «We want to increase our dividend per share each year.»

New strategy being implemented with speed and determination

With its new strategy, BASF defined numerous measures for more customer focus and efficiency as well as for a more effective organization of the company. «Despite the challenges, we will implement our strategic growth initiatives rapidly, thoroughly and rigorously,» said Brudermüller.

BASF is currently reshaping its organization, streamlining administration, sharpening the roles of the service units and regions and simplifying procedures and processes. In recent months, significant parts of the functional services have been embedded in the operating divisions. As of the end of July, 15,000 employees are working closer to customers and more will be doing so by October. Furthermore, the company has defined a lean corporate center with fewer than 1,000 employees to support the Board of Executive Directors in steering the BASF Group. This corporate center accounts for less than 1% of the total workforce. The remaining service activities will be assigned to four cross-functional service units. They will initially comprise approximately 29,000 employees.

These measures are part of BASF’s excellence program. Leaner structures and simplified processes should lead to savings of around ˆ300 million annually. «A considerable contribution is also anticipated from operational excellence measures in production, logistics and planning. Digitalization and automation will play an important role as well. Overall, we expect an EBITDA contribution of ˆ2 billion annually from the end of 2021 onward,» said Brudermüller.

As previously announced, BASF plans to reduce around 6,000 positions worldwide by the end of 2021. This will result from organizational simplification and from efficiency gains in administration, services and the operating divisions. In addition, central structures are being streamlined in the context of the announced portfolio changes in the construction chemicals and pigments businesses.

Brudermüller provided an update on the severance program: «At BASF SE in Ludwigshafen, more than 1,100 employees accepted an offer and signed termination agreements in the first half of the year.»

Growth in BASF’s customer industries below expectations in the first half of 2019

Looking back, growth in BASF’s customer industries in the first half of the year was significantly below expectations. Growth in industrial production slowed considerably around the world. For example, automotive production: The original overall forecast for 2019 was plus 0.8% but it declined worldwide by 6% in the first half-year. In China, there was even a drop of 13%. Compared to the prior-year period, chemical production declined by 0.5% in BASF’s home market of Europe. The downturn in Germany was particularly pronounced at minus 3.5%.

The agriculture sector suffered from prolonged heavy precipitation in the major growing regions of North America. Brudermüller: «Flooding and extreme conditions literally led to bad weather for our Agricultural Solutions business.»

Chemicals and Materials segments impact second-quarter earnings

Dr. Hans-Ulrich Engel, Chief Financial Officer of BASF SE, discussed the second-quarter figures. As in the entire first half of 2019, earnings in the second quarter of 2019 were significantly negatively impacted by the lower volumes and margins in the Chemicals and Materials segments. «In total, the two segments accounted for 83% of the overall earnings decline in the second quarter of 2019,» Engel said.

Earnings in the Agricultural Solutions segment considerably decreased as well. This was mainly due to the seasonally negative earnings of the acquired businesses and lower volumes in the crop protection business. Significantly higher earnings in Industrial Solutions and slightly higher earnings in the Surface Technologies and Nutrition & Care segments could only partially offset the decline.

Special items in EBIT totaled minus ˆ497 million compared with minus ˆ66 million in the second quarter of 2018. The increase in special items was due in part to one-time costs for the excellence program. Moreover, there was an impairment of a natural gas-based investment on the U. S. Gulf Coast, which BASF is no longer pursuing. In addition, the integration of the acquired businesses and assets from Bayer led to special items in the Agricultural Solutions segment. EBIT decreased from ˆ1.9 billion in the prior-year period to ˆ548 million in the second quarter of 2019.

Net income amounted to ˆ6.5 billion, compared with ˆ1.5 billion in the second quarter of 2018. Reported earnings per share increased from ˆ1.61 to ˆ7.03 in the second quarter of 2019. This was due to the book gain from the deconsolidation of Wintershall following the closing of the merger of Wintershall and DEA. Adjusted earnings per share amounted to ˆ0.82; this compares with ˆ1.77 in the prior-year quarter.

The cash flows from operating activities came in at ˆ1.9 billion, compared with ˆ2.2 billion in the second quarter of 2018. The free cash flow decreased by 31% to ˆ965 million.

New macroeconomic assumptions for 2019 outlook

«The global economic risks have increased significantly during recent months,» said Brudermüller. «This has been driven by geopolitical developments and the ongoing trade conflicts between the United States and its trading partners. These conflicts will not be resolved in the near future and are causing a noticeable slowdown in macroeconomic growth around the world, particularly in China.»

BASF significantly lowered its 2019 growth expectations for global industrial production and for global chemical production — from 2.7% to around 1.5% in both cases. «The automotive industry — an important customer industry for BASF — will not recover this year. We now expect a global decline of minus 4.5% over the full year,» said Brudermüller. «Customers in all industries are currently very cautious with projections and ordering. Our visibility on demand development is also very low.»

BASF Group outlook for 2019 adjusted

With a view to the challenging macroeconomic environment, the 2019 outlook for BASF Group was adjusted on July 8: BASF now anticipates a slight decline in sales. For EBIT before special items, the company expects a considerable decline of up to 30%. Return on capital employed (ROCE) for the full year 2019 is anticipated to decline considerably compared with the previous year.

Agro Perspectiva

< Harvesting campaign 2019: 2.8 million tons rapeseeds harvested All news for
25.07.2019
‘Deadly environment’ plus ‘political and social’ obstacles hinder Congo Ebola fight >

28.03.2024  
12:55 Council compromise on Ukraine ATMs – Only a half step forward in the right direction
09:18 Commission approves amendment to Italian State aid scheme to support companies in Friuli Venezia Giulia in the context of Russia's war against Ukraine
26.03.2024  
10:55 Projected famine in Gaza: FAO urges immediate access to deliver urgent and critical assistance at scale. About 1.1 million people are experiencing catastrophic food insecurity
08:44 EU makes major step forward in the delivery of 2024 humanitarian aid for Palestinians in Gaza*
25.03.2024  
16:17 Commission approves ˆ86.9 million Bulgarian State aid scheme to support farmers in the context of Russia's war against Ukraine
21.03.2024  
11:15 Commission takes action to boost biotechnology and biomanufacturing in the EU
20.03.2024  
11:13 Deal to extend trade support for Ukraine with safeguards for EU farmers
19.03.2024  
09:43 CAP - The Commission proposes simplifications that safeguard agricultural transitions!
18.03.2024  
23:10 The European Union and Switzerland launch negotiations to deepen bilateral relations
10:05 Commission proposes targeted review of Common Agricultural Policy to support EU farmers
15.03.2024  
23:36 Cargill Power CanolaTM Program Helps Farmers Take Advantage of Growing Bioenergy Market Opportunities for Canadian Canola
23:19 FAO will provide Ukrainian farmers with soybean and sunflower seeds for spring sowing campaign
13.03.2024  
23:27 FAO urges more cooperation in banana sector, significant for some least developed and low-income food-deficit countries and smallholder farmers
16:51 The European Commission sets out key steps for managing climate risks to protect people and prosperity
12.03.2024  
20:25 Coreper and COMENVI approve the provisional agreement on EU Carbon Removal Certification Framework
20:24 INTA MEPs fail EU producers by dismissing potential improvements to Ukraine ATMs
08:10 Soybean meal is expected to be a more competitive feed ingredient on higher global supplies.
11.03.2024  
09:11 U.S. Corn Exports Shift Destinations as Brazil Captures China Market
08.03.2024  
15:20 Conflicts push acute food insecurity higher
13:21 FAO Food Price Index declines further in February
13:14 Packaging: Council and Parliament strike a deal to make packaging more sustainable and reduce packaging waste in the EU
11:45 Commission approves ˆ61.3 million Bulgarian State aid scheme to support farmers, producers of grain and oil crops, in the context of Russia's war against Ukraine
07.03.2024  
20:41 First go-ahead to renewing trade support for Ukraine and Moldova
05.03.2024  
15:55 Commission proposes to prolong road transport agreements with Ukraine and Moldova and introduces updates to the agreement with Ukraine
02.03.2024  
07:31 Heroes of deserts and highlands: Nourishing people and culture
23.02.2024  
10:21 BASF’s financial strength supports proposed stable dividend of ˆ3.40 per share for the 2023 business year
10:17 The Council has chosen to ignore farmers' concerns regarding Ukraine ATMs; it is now imperative for the European Parliament to take action
20.02.2024  
20:27 South Asia is anticipated to import nearly 14 million tons wheat in 2023/24
19.02.2024  
13:00 Cargill and ENOUGH expand partnership to provide consumers with innovative, sustainable protein options
17.02.2024  
17:47 Global Environment Facility approves new FAO-led projects and programs benefiting 46 countries
16.02.2024  
09:10 The EU is at a crossroads with the Ukrainian agricultural issue - COPA-COGECA, AVES, CEFS, CEPM, CIBE, EUWEP
13.02.2024  
17:31 European farmers exempted from rules on land lying fallow
12.02.2024  
16:45 India Wheat Stocks Plummet to Lowest in 15 Years
03.02.2024  
17:35 Mandarins. Global production for 2023/24 is forecast to rise to 38.0 million tons
09:59 Record cereal output in 2023
07:15 FAO Food Price Index down again in January led by lower wheat and maize prices
29.01.2024  
10:32 President von der Leyen launches Strategic Dialogue on the Future of EU Agriculture
26.01.2024  
11:31 Record Exports Forecast for Egypt Oranges
23.01.2024  
17:55 With the Federal Chancellor in the show bakery
19.01.2024  
11:45 Organic production in Ukraine
16.01.2024  
23:25 Domestic consumption of dairy products may double in 2024 – analysts
12.01.2024  
23:53 Competition Tightens for Leading Pork Exporter
22:55 Peru Fish Meal Exports at Lowest Level Since 2015/16 El Niño
22:43 Grains Trade Disrupted by Challenges in Key Shipping Routes
10.01.2024  
15:38 In China, the largest import market for dairy products, surplus raw milk production led to government subsidies to stabilize the domestic processing sector
09.01.2024  
11:55 The FAO Sugar Price Index averaged 134.6 points in December, down 26.8 points from November
06.01.2024  
12:43 Polish fish and seafood imports continued to grow in 2022 and reached over $3 billion, with a $129 million (4 percent market share) originating from the USA
05.01.2024  
17:21 EU imports are dominated by unroasted green coffee beans, which accounts for about 90 percent of trade
17:00 FAO Food Price Index declines in December. Benchmark measure of world food commodity prices ends 2023 about 10 percent below its year-earlier level
29.12.2023  
09:53 Global and Bank of Georgia sign EUR50 million loan agreement to support small businesses

Also available: 


NewsNews - News - News - News - News - News
BriefWeekly Reports - Free article
SubscriptionTariff - News&Reports
AdvertisingMagazine - Site
ConferencesForum AGRO-2013 - DAIRY WORLD-2008 - FERTILIZERS-2010
Statistics
For our clientsAgroNewsDaily - Ukrainian Grain&Oilseed Market - Fertilizers - Milk Monthly - Milk Weekly
About usAbout project - Contact
2002 -2024 © Agrarika, ltd.
tel.: +380 67 4473802; +380 67 5964652
e-mail: client@agroperspectiva.com