BASF warns on the outlook

Bock.pngLast month, the blog suggested that CEOs might want to warn investors of the threat to earnings from high oil prices, unemployment and economic fragility.

BASF, the world’s largest chemical company, have done exactly this today. New Chairman, Dr Kurt Bock warned:

“The economic risks remain: We continue to be concerned about the development of the euro as well as the debt situation in some European countries and the United States. Added to this is the persistently high oil price, which is having a negative impact on margins across our value chains and is leading to some customers being more cautious in their orders.”

Investors were clearly unprepared for BASF’s note of caution, and marked the share price down 5% in early trading. They clearly still believe in the SuperCycle theory, and want to believe that earnings will rise steadily over the next few years.

Dr Bock and BASF are to be congratulated for injecting a note of realism into this wishful thinking.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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