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’s earnings in tough market environment significantly below strong prior-year quarter

28.07.2023 18:55 "Agro Perspectiva" (Kyiv) — BASF Group 2nd quarter 2023:

Sales decline by 24.7 percent to ˆ17.3 billion

EBIT before special items down by ˆ1.3 billion to ˆ1.0 billion

Adjusted outlook 2023:

Sales of between ˆ73 billion and ˆ76 billion expected

EBIT before special items of between ˆ4.0 billion and ˆ4.4 billion expected

In a tough market environment, BASF Group sales in the second quarter of 2023 declined by 24.7 percent compared with the prior-year period to ˆ17.3 billion. «We faced low demand from our key customer industries, except for automotive,» said Dr. Martin Brudermüller, Chairman of the Board of Executive Directors of BASF, when presenting the results together with Chief Financial Officer Dr. Dirk Elvermann.

BASF had already adjusted its outlook for 2023 and released preliminary figures on July 12. The decline in sales was mainly driven by lower prices, primarily in the Chemicals, Surface Technologies and Materials segments. The Agricultural Solutions segment was able to implement price increases. Lower sales volumes as a result of weaker demand weighed down the sales performance in all segments. In addition, currency effects dampened sales.

Income from operations (EBIT) before special items of ˆ1.0 billion in the second quarter of 2023 was ˆ1.3 billion below the figure of the prior-year period. Almost all segments contributed to this with significant declines in earnings, in particular the Chemicals and Materials segments. EBIT before special items of the Agricultural Solutions segment decreased slightly. Surface Technologies achieved slight earnings growth. EBIT before special items attributable to Other improved considerably. EBIT decreased by ˆ1.4 billion to ˆ974 million. This figure includes income from integral companies accounted for using the equity method amounting to ˆ22 million (prior-year period: ˆ101 million).

Income from operations before depreciation, amortization and special items (EBITDA before special items) declined by ˆ1.3 billion to ˆ1.9 billion and EBITDA by ˆ1.5 billion to ˆ1.9 billion in the second quarter of 2023. Net income amounted to ˆ499 million, compared with ˆ2.1 billion in the prior-year quarter.

Development of cash flows in the second quarter of 2023

Cash flows from operating activities amounted to around ˆ2.2 billion in the second quarter of 2023, ˆ950 million above the figure of the prior-year period. Payments made for intangible assets and property, plant and equipment increased by ˆ381 million compared with the prior-year quarter to reach ˆ1.3 billion. Free cash flow thus amounted to ˆ905 million in the second quarter of 2023, an improvement of ˆ569 million compared with the second quarter of 2022.

Development of BASF’s segments in the second quarter of 2023

Sales in the Chemicals segment in the second quarter of 2023 decreased by 38.4 percent compared with the prior-year period and amounted to ˆ2.7 billion. Lower raw materials prices, combined with a massive excess of supply and weaker demand, led to lower prices in both operating divisions. Compared with the prior-year quarter, EBIT before special items declined by 76.3 percent to reach ˆ202 million.

At ˆ3.6 billion, sales in the Materials segment were 25.8 percent lower than in the strong prior-year quarter. The decline in sales resulted mainly from significantly lower prices in all regions due to decreased raw materials prices. Sales performance was additionally weighed down in the second quarter of 2023 by a further deterioration in demand. EBIT before special items declined by 60.4 percent compared with the prior-year quarter and amounted to ˆ265 million.

Sales in the Industrial Solutions segment declined by 22.5 percent compared with the prior-year quarter and amounted to ˆ2.1 billion. This development was mainly attributable to a sharp decline in volumes resulting from weaker demand. EBIT before special items fell by 61.6 percent to reach ˆ124 million in the second quarter of 2023.

At ˆ4.2 billion, sales in the Surface Technologies segment were 22.4 percent lower than in the second quarter of 2022. The sales performance of the segment was primarily attributable to significantly lower precious metal prices in the Catalysts division. The segment increased EBIT before special items by 1.5 percent compared with the prior-year quarter to ˆ230 million. A considerable earnings growth in the Coatings division more than compensated for the decline in EBIT before special items in the Catalysts division.

Sales of ˆ1.7 billion in the Nutrition & Care segment were 17.4 percent lower than in the prior-year quarter. The sales performance was attributable to a sharp decline in volumes in all business areas as a result of lower demand. The segment’s EBIT before special items decreased by 84.8 percent to ˆ33 million.

In the Agricultural Solutions segment, sales of ˆ2.2 billion were 9.3 percent below the level of the prior-year quarter. The main reason for this was the decline in volumes due to higher channel inventories in individual core markets as well as lower agricultural commodity prices. At ˆ213 million, EBIT before special items was 4.3 percent below the prior-year quarter, especially due to lower volumes.

Sales in Other declined by 30.0 percent compared with the prior-year quarter and amounted to ˆ799 million. This was primarily due to lower sales in commodity trading. Compared with the prior-year quarter, Other recorded a 64.1 percent improvement in EBIT before special items to minus ˆ60 million. This was mainly attributable to an improved contribution from insurance companies.

Measures to increase competitiveness

BASF is implementing a number of measures to improve competitiveness. As announced at the end of February, the company is executing a cost savings program with a focus on Europe and is adapting its Verbund structures in Ludwigshafen, Germany. «Together with the initiatives that were already underway in our global service units, we will reduce fixed costs by the end of 2026 so that they will then be around ˆ1 billion lower annually,» said Elvermann. By the end of 2023, BASF expects to achieve annual savings of more than ˆ300 million from the cost savings program. «In addition, we continuously and strictly control our fixed costs and avoid discretionary costs wherever possible. We have a sharper focus on cash management to optimize our free cash flow. Over the course of the year, we will continue to reduce our inventory levels,» Elvermann added.

BASF Group outlook 2023

«We do not expect a further weakening in demand at the global level for the second half of 2023, as the inventories of chemical raw materials in most customer industries have already been greatly reduced,» Brudermüller said. «However, we are assuming only a tentative recovery because we expect that global demand for consumer goods will grow slower than previously assumed. Margins are therefore expected to remain under pressure.»

The assumptions for the global economic environment in 2023 were adjusted due to the changed economic developments as follows (previous assumptions from the BASF Report 2022 in parentheses; current growth assumptions are rounded):

Growth in gross domestic product: 2.0 percent (1.6 percent)

Growth in industrial production: 1.0 percent (1.8 percent)

Growth in chemical production: 0.0 percent (2.0 percent)

Average euro/dollar exchange rate of $1.10 per euro ($1.05 per euro)

Average annual oil price (Brent crude) of $80 per barrel ($90 per barrel)

Based on the adjusted expectations for further development in the second half of the year, the forecast for the BASF Group for the 2023 business year was adjusted as follows (previous forecast from the BASF Report 2022 in parentheses):

Sales of between ˆ73 billion and ˆ76 billion

(between ˆ84 billion and ˆ87 billion)

EBIT before special items of between ˆ4.0 billion and ˆ4.4 billion

(between ˆ4.8 billion and ˆ5.4 billion)

Return on capital employed (ROCE) of between 6.5 percent and 7.1 percent

(between 7.2 percent and 8.0 percent)

CO2 emissions of between 17.0 million metric tons and 17.6 million metric tons

(between 18.1 million metric tons and 19.1 million metric tons)

Agro Perspectiva

< Brazil continues to make export gains and set new records for beef, pork, and chicken meat All news for
28.07.2023
FAO welcomes European Union contribution of ˆ25 million to advance wildlife conservation and food security >

30.09.2024  
17:27 List of agricultural machinery with cost compensation expanded to 11,300 items
29.09.2024  
20:21 1 in 11 people worldwide faced hunger in 2023, 1 in 5 in Africa If current trends continue, about 582 million people will be chronically undernourished in 2030, half of them in Africa
17:13 EU agri-food surplus increased in the first half of 2024
27.09.2024  
09:02 BASF presents new corporate strategy: BASF is setting a new direction for portfolio steering, capital allocation and performance culture
26.09.2024  
10:25 BASF sets new direction with corporate strategy and maintains high level of shareholder distributions
21.09.2024  
18:30 Three new sites recognized as Globally Important Agricultural Heritage Systems (GIAHS)
17.09.2024  
09:52 Cargill and Ducks Unlimited Working Together to Restore Watersheds Across North America
08:44 FAO calls for G20 cooperation as hunger targets continue to elude
06:40 FAO sees open trade as a cornerstone of global food security
13.09.2024  
07:08 U.S. Soybean Meal Hits 10‐Year High for Export Sales
12.09.2024  
21:26 U.S. Corn Exports Buoyed by Large Supplies
11.09.2024  
04:30 Global cereal production 2024 forecast on par with 2023 output, cereal trade likely to contract
06.09.2024  
11:35 FAO Food Price Index down marginally in August: lower sugar, meat and cereal quotations offset higher dairy and vegetable oil prices
10:34 Cargill acquires two US feed mills, strengthens production and distribution capabilities to grow with customers
05.09.2024  
09:23 PM: Plan to develop small generation facilities to reduce vulnerability to terrorism
30.08.2024  
05:03 Taras Vysotskyi discusses agricultural cooperation with Hungarian counterpart István Nagy
19.08.2024  
12:00 OTP BANK RECEIVED A $2.76 MILLION GRANT FROM USAID INVESTMENT FOR BUSINESS RESILIENCE ACTIVITY FOR CONCESSIONAL LENDING TO MICRO, SMALL, AND MEDIUM-SIZED ENTERPRISES
16.08.2024  
17:10 Cargill and Goanna Ag Pilot Irrigation Efficiency Technology on Mississippi Delta Cotton Fields
12.08.2024  
20:04 Ukraine Soybean Exports Forecast at Record in 2024/25
19:48 Domestic Demand and Trade Restrictions Reduce India Grain Exports
11.08.2024  
09:15 USAID Announces $3.9 billion in Direct Budget Support to the Government of Ukraine
09.08.2024  
17:41 USAID Announces $3.9 billion in Direct Budget Support to the Government of Ukraine
07.08.2024  
08:19 Turkey’s Mandarin Production and Exports to Rebound
26.07.2024  
09:28 Ongoing Economic Crisis in Argentina Impacts Dairy
15.07.2024  
10:28 Decline of China Pork Imports Continues in 2024
08:20 Lower Prices Propel Mexico 2023/24 Soybean Meal Imports
13.07.2024  
10:15 China Imports of Major Feed Grains at Record for Oct-May period
12.07.2024  
01:08 Climate risks projected to affect fish biomass around the world's ocean, FAO report says
06.07.2024  
10:15 Global cereal production 2024 forecast scaled up and now set to exceed the 2023 level
10:01 FAO Food Price Index stable in June
03.07.2024  
12:31 World pear production for MY 2023/24 is projected up more than 275,000 tons to 25.2 million
12:23 U.S. wheat exports are forecast to rebound by more than a million tons in the 2024/25 marketing year
01.07.2024  
08:58 World apple production for MY 2023/24 is forecast to rise more than 700,000 tons to 83.7 million
08:39 World coffee production for 2024/25 is forecast to rebound 7.1 million bags
25.06.2024  
17:57 Central, Eastern and South-Eastern European banks report strengthening loan demand and improving profitability
17:05 Global Environment Facility approves $70 million to support FAO projects in 28 countries
24.06.2024  
04:15 Emergency brake triggered for oat imports from Ukraine
23.06.2024  
09:00 Colombia Production: Two Periods of Sharp Decline
19.06.2024  
15:35 World pear production for MY 2023/24 is projected up more than 275,000 tons to 25.2 million
10:35 India Apple Imports Forecast at a Record High
12.06.2024  
09:21 FAO Food Price Index slightly up in May: higher cereal and dairy prices offset easing sugar and vegetable oil quotations
03.06.2024  
14:04 Commission clarifies support for farmers in case of exceptional weather events
13:33 Digitalization: it is time to bridge the gap between urban and rural areas
22.05.2024  
18:25 Two years of Solidarity Lanes have brought the EU, Ukraine and Moldova closer together
21.05.2024  
08:10 Seven additional private sector leaders announce support for Antimicrobial Use Stewardship Principles in poultry, now includes over 40% of global poultry meat production
13.05.2024  
23:32 EU extends trade support to Ukraine for one more year
04:36 European Union corn is forecast at 18.0 million tons
11.05.2024  
18:55 2024/25 Grain Consumption Expands while Trade Moderates
18:47 Oilseeds Stocks Forecast to Reach Record Highs in 2024/25
06.05.2024  
09:17 The International Year of the Woman Farmer in 2026 Approved by the UN General Assembly, it will increase awareness of the crucial role women farmers play in agrifood systems

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