BASF’s Q4 earnings fall sharply on lower chemicals, agro contributions

LUDWIGSHAFEN, Germany (ICIS)–BASF’s earnings fell sharply in the fourth quarter, year on year, as a result of negative performances at its Chemicals and Agricultural Solutions divisions as well as a €200m negative impact from River Rhine-related logistics, the German chemical major said on Tuesday.

€/m	Q4 2018	Q4 2017	Change
Sales	15,586	15,231	2.3%
EBIT*	469	1,421	-67%
EBITDA**	1,336	2,266	-41
Net income	348	1,537	-77.4%
*Earnings before interest and taxes **Earnings before interest, taxes, depreciation and amortisation

Key points:

– BASF had lower earnings in its key Chemicals division, due lower margins in the isocyanate and cracker business, as well as in Agricultural Solutions, which suffered a 3% negative impact from costs associated to the acquisition of Bayer’s seeds assets.

– The slight increase in sales achieved in the fourth quarter came on the back of higher selling prices at its Performance Products, Functional Materials & Solutions and Agricultural Solutions divisions.

– However, overall sales volumes declined 3% on the back of low water levels on the River Rhine during the fourth quarter, “which severely limited shipments of key raw materials” to the company’s flagship site of Ludwigshafen, which force it to reduce capacity utilisation.

Outlook:

– For 2019, BASF said it expected the global economy to grow at a “considerably slower” rate than in 2018, from 3.2% to 2.8%.

– “In the EU, the company anticipates weaker growth in both domestic demand and export demand from third countries. On the other hand, BASF presumes the US will deliver solid growth, although the stimulus effect of the tax reform should be less pronounced than in 2018.”

– The company said it expected growth in China to cool down in 2019 although it would remain high, while it expects the recovery in key Latin American economy Brazil to hold up.

– BASF said it expects global chemical production to grow by 2.7% in 2019, flat compared to 2018, and an average crude oil price of $70/bbl; it assumes an exchange rate dollar/euro of €1:$1.15.

Full-year figures:

€/m	2018	2017	Change
Sales	62,675	61,223	2.4%
EBIT*	6,033	7,587	-20.5%
EBITDA**	9,166	10,765	-14.9%
Net income	4,707	6,078	-22.6%

DIVISIONAL PERFORMANCE
All divisions within BASF posted full-year falls in EBIT and EBITDA, although most of them managed to increase sales, apart from Performance Products.

“Overall, 2018 was a year characterised by difficult global economic and geopolitical developments and trade conflicts. In the second half of the year, BASF felt an economic slowdown in key markets, especially in the automotive industry, BASF’s largest customer sector,” said the company.

“In particular, demand from Chinese customers declined significantly. The trade conflict between the US and China contributed to this. Around the world, uncertainties grew. Many market participants therefore acted very cautiously.”

Although the company started up a new corporate structure from 1 January, financial results for 2018 were still reported as per the former divisional structure. BASF’s new organigram can be seen here.

Functional Materials & Solutions
€/m	2018	2017	Change
Sales	21,435	20,745	3%
EBIT	1,235	1,545	-20%
EBITDA	1,917	2,251	-15%

Chemicals
€/m	2018	2017	Change
Sales	16,501	16,331	1%
EBIT	3,360	4,208	-20%
EBITDA	4,432	5,374	-18%

Performance Products
€/m	2018	2017	Change
Sales	15,812	16,217	-2%
EBIT	1,338	1,510	-11%
EBITDA	2,205	2,427	-9%

Agricultural Solutions
€/m	2018	2017	Change
Sales	6,156	5,696	8%
EBIT	591	1,015	-42%
EBITDA	985	1,282	-23%

Other
€/m	2018	2017	Change
Sales	2,771	2,234	24%
EBIT	-491	-691	29%
EBITDA	-373	-569	34%

(Adds divisional performance from paragraph 9)

Pictured: BASF’s Ludwigshafen site by the River Rhine in Germany
Source: BASF