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: EBIT before special items declines in second quarter due to weaker demand as a result of the corona pandemic

29.07.2020 13:35 "Agro Perspectiva" (Kyiv) Q2 2020:

Sales of 12.7 billion (minus 12%), mainly due to lower sales volumes resulting from lockdowns

EBIT before special items of 226 million (minus 77%)

Net income of minus 878 million due to a non-cash-effective impairment of the shareholding in Wintershall Dea

Cash flows from operating activities of 2.2 billion (plus 296 million compared with prior-year quarter); Free cash flow of 1.5 billion (plus 551 million compared with prior-year quarter)

Concrete statements on the development of sales and earnings in 2020 still not possible

As expected, the economic effects of the corona pandemic had a much stronger impact in the second quarter of 2020 than in the first quarter of this year. Customer industries were affected to varying degrees: BASF was particularly negatively impacted by the collapse in demand from the automotive industry, while demand from the detergent and cleaner industry and the food industry was stable. BASF was able to continue production at all important sites worldwide.

«The corona pandemic is still a huge challenge for all of us,» said Dr. Martin Brudermüller, Chairman of the Board of Executive Directors of BASF, who presented the second-quarter figures together with Chief Financial Officer Dr. Hans-Ulrich Engel. Brudermüller also sees opportunities: «This situation is a catalyst for change and a chance to do many things differently. At BASF, we have quickly adapted to new processes. Everyone is very open to virtual communication, internally and with our customers.» According to the CEO, BASF is able in times like these to build on its many strengths: flexible and motivated employees, a diversified portfolio and the companys solid financials.

Given the continued high level of uncertainty and low visibility surrounding economic developments, BASF still does not make any concrete statements on the development of sales and earnings for the full year 2020. For the third quarter, BASF does not expect EBIT before special items to improve significantly compared with the second quarter of 2020, in part due to the generally lower demand in August and the seasonality of the Agricultural Solutions business.

BASF Groups economic performance in the second quarter 2020

Sales in the second quarter decreased by 12 percent to 12.7 billion. This was primarily attributable to lower sales volumes of minus 11 percent. Prices decreased by 1 percent, mainly due to lower prices for upstream chemicals. Considerably higher prices in the Surface Technologies segment and slightly higher prices in the Agricultural Solutions segment could only partially offset this. Prices in the Surface Technologies segment were supported by higher prices for precious metals in the Catalysts division. Portfolio effects contributed plus 1 percent and were mainly related to the acquisition of Solvays polyamide business. Currency effects amounted to minus 1 percent. The devaluation of the Brazilian real and the Argentinian peso were the main reasons here.

Income from operations (EBIT) before special items came in at 226 million, 77 percent below the level of the second quarter of 2019. With the exceptions of Nutrition & Care and Other, which increased earnings, and Agricultural Solutions, where earnings nearly matched the level of the prior-year quarter, all other segments posted lower earnings. This was the result of the pronounced drop in demand in most of BASFs customer industries. The Chemicals and the Materials segments accounted for 70 percent of the earnings decline.

Special items in EBIT amounted to minus 167 million, compared with minus 488 million in the second quarter of 2019. Special charges were, for example, related to the carve-out of the pigments business and BASFs «Helping Hands» coronavirus aid campaign. In the prior-year quarter, special charges were mainly caused by one-time costs for the excellence program and the impairment of a natural gas-based investment on the U. S. Gulf Coast. In the second quarter of 2020, EBIT thus decreased by 88 percent to 59 million.

Net income amounted to minus 878 million compared to almost 6 billion in the second quarter of 2019. In the second quarter of 2020, BASF incurred a non-cash-effective impairment of its shareholding in Wintershall Dea. Lower long-term scenarios for oil and gas prices and changed reserve estimates resulted in an impairment of 819 million. In the prior-year quarter, net income included a book gain of 5.7 billion on the deconsolidation of Wintershall.

Cash flows from operating activities increased from 1.9 billion to 2.2 billion in the second quarter of 2020. The increase was primarily due to cash released from net working capital, which rose by 336 million. Free cash flow rose by more than 500 million compared with the second quarter of 2019 and amounted to 1.5 billion.

Development of BASFs segments in the second quarter 2020

Sales in the Chemicals segment amounted to 1.8 billion. Sales declined considerably compared with the second quarter of 2019 in both divisions, but especially in the Petrochemicals division. The sales decrease was primarily the result of significantly lower prices in both divisions. In the Petrochemicals division, the decrease in prices was largely due to higher product availability on the market and lower raw materials prices. The lower prices in the Intermediates division mainly reflected continued weak demand. By contrast, sales volumes increased in the Chemicals segment thanks to the positive development of volumes in the Petrochemicals division.

At minus 2 million, EBIT before special items was considerably below the level of the prior-year quarter. The considerable decrease affected both divisions, but in particular the Intermediates division. Here, the decline in earnings was primarily due to lower volumes and higher fixed costs, primarily as a result of the gradual startup of the new acetylene plant in Ludwigshafen, Germany. Higher margins on the back of lower raw materials prices had an offsetting effect and led overall to positive EBIT before special items in the Intermediates division. EBIT before special items declined in the Petrochemicals division, mainly due to scheduled turnarounds in Nanjing, China, and lower margins. In addition, an unscheduled turnaround occurred in June at the steam cracker in Port Arthur, Texas.

In the Materials segment, sales of 2.1 billion were considerably below the level of the second quarter of 2019. Sales development was primarily driven by significantly lower volumes in both divisions due to the effects of the corona pandemic, especially in the Performance Materials division. The decrease in sales volumes here was largely attributable to much weaker demand from the automotive industry. Volumes also declined in the consumer goods and construction industries. In the Monomers division, volumes declined for isocyanates in particular. Significantly lower price levels for isocyanates and polyamides in the Monomers division also contributed to the sales decrease. Prices were slightly lower in the Performance Materials division. Sales in both divisions were positively impacted by portfolio effects from the acquisition of Solvays integrated polyamide business. Currency effects were negative.

At minus 80 million, EBIT before special items declined considerably in both divisions compared with the prior-year quarter, especially in the Monomers division. This was primarily due to lower isocyanate margins on the back of weak demand. EBIT before special items in the Performance Materials division also declined considerably, mainly as a result of lower volumes.

In the Industrial Solutions segment, sales in both divisions declined considerably compared with the prior-year quarter to 1.8 billion in total. The decrease was primarily due to significantly lower volumes in both divisions. The development of sales volumes in the Performance Chemicals division was negatively impacted by weak demand, especially in the fuel and lubricant solutions and oilfield chemicals businesses. In the Dispersions & Pigments division, higher semiconductor volumes in the electronic materials business were unable to offset lower volumes in all other business areas. Slightly lower prices in both divisions, but especially in the Dispersions & Pigments division, also contributed to the sales decrease. Price levels declined, mainly due to lower raw materials prices.

EBIT before special items was 163 million and decreased considerably compared with the prior-year quarter in both divisions. This was mainly driven by the development of volumes. Slightly lower fixed costs had an offsetting effect in both divisions.

In the Surface Technologies segment, sales declined slightly to 3.1 billion due to a considerable sales decrease in the Coatings division. By contrast, BASF considerably increased sales in the Catalysts division. The sales development was primarily driven by significantly lower sales volumes in both divisions. This was due to weak demand from the automotive industry owing to the effects of the corona pandemic. Lower volumes, especially for mobile emissions catalysts, in precious metal trading and for refining catalysts, reduced sales in the Catalysts division. In the Coatings division, volumes declined in all business areas. Significantly higher prices overall as a result of higher precious metal prices in the Catalysts division had an offsetting effect. In precious metal trading, sales rose to 1.5 billion due to higher prices (prior-year quarter: 1.1 billion). Prices rose slightly in the Coatings division, mainly in the decorative paints and surface treatments businesses.

EBIT before special items of minus 151 million was considerably below the level of the prior-year quarter in both divisions. This was largely driven by the development of sales volumes in both divisions.

Compared with the second quarter of 2019, BASF slightly increased sales in the Nutrition & Care segment to 1.6 billion. This was driven by considerable sales growth in the Nutrition & Health division, while sales in the Care Chemicals division were on a level with the prior-year quarter. The slight sales increase was primarily due to higher volumes in both divisions. The significant volumes growth in the Nutrition & Health division was mainly attributable to the aroma ingredients, pharmaceutical and human nutrition businesses. Sales volumes rose slightly in the Care Chemicals division. Higher volumes in the home care, industrial and institutional cleaning and industrial formulators business, as well as in the oleo surfactants and alcohols business contributed to sales growth. Negative currency effects, especially in South America, partially offset this increase. Sales were also negatively impacted by a slightly lower price level.

EBIT before special items increased considerably compared with the prior-year quarter to 256 million, thanks to a significantly higher contribution from the Nutrition & Health division. This was primarily due to higher margins resulting from higher volumes and prices. EBIT before special items in the Care Chemicals division declined slightly, mainly from higher fixed costs due to a one-off contractual payment in the prior-year quarter.

Sales of approximately 1.8 billion in the Agricultural Solutions segment were slightly below the level of the second quarter of 2019. This was mainly attributable to negative currency effects, especially in the region South America, Africa, Middle East. Higher volumes in all regions except Europe and higher price levels had a positive impact on sales.

At 120 million, EBIT before special items almost matched the level of the prior-year quarter. EBIT before special items was negatively impacted by currency effects and an unfavorable product mix. This was almost offset by significantly lower fixed costs. EBIT included special items for the integration of the businesses acquired from Bayer; these were lower than in the prior-year quarter.

Sales of 507 million in Other were considerably lower compared with the prior-year quarter. This primarily reflected the decrease in commodity trading and in the remaining activities of the paper and water chemicals business. EBIT before special items of minus 80 million in Other was considerably above the figure for the prior-year quarter.

Agro Perspectiva

< The renaissance of industrial hemp in North America: How New Holland supports an evolving industry All news for
29.07.2020
Govt approves macroeconomic forecast with 4.6% GDP growth in 2021 >

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
04.05.2024  
08:10 2024 wheat forecast trimmed
03.05.2024  
21:25 Rising international quotations for meat, cereals and vegetable oils offset drops for dairy and sugar
07:10 El Niño and La Niña: four crucial steps to build climate resilience
01.05.2024  
08:25 Acute hunger remains persistently high in 59 countries with 1 in 5 people assessed in need of critical urgent action
29.04.2024  
10:43 New CEO at BASF: Martin Brudermüller hands over to Markus Kamieth
25.04.2024  
09:45 Parliament approves a revision of the EUs common agricultural policy
23.04.2024  
16:23 MEPs approve trade support measures for Ukraine with protection for EU farmers
17.04.2024  
18:08 Ministry of Agrarian Policy and Food predicts this years harvest of grains and oilseeds at about 74 million tonnes
16.04.2024  
12:12 West Africa Cocoa Shortage Pushes Up Prices
11.04.2024  
23:48 U.S. Soybean Meal Exports Forecast at Consecutive Records in 2022/23 and 2023/24
23:10 EU Wheat Exports Challenged by Russias Growing Dominance
11:30 Country of origin of honey must be clearly visible on the label. EU honey traceability system to be developed
10.04.2024  
15:59 Commission starts setting up the Agriculture and Food Chain Observatory
15:33 Commission approves 2.2 billion German State aid scheme to support the decarbonisation of industrial processes to foster the transition to a net-zero economy
13:17 Donau Soja urges EU for clarity on EUDR implementation
09.04.2024  
10:44 Ukraine remained the third source of EU imports in 2023, with a value of EUR 11.8 billion
06.04.2024  
10:04 World cereal output seen up in 2023/24
09:55 FAO Food Price Index rises in March
05.04.2024  
10:04 Shellfish Crop Insurance Program Offers Oyster Producers Needed Protection from Environmental Challenges and More
03.04.2024  
23:01 Croatian horseradish root Ludbreški hren' added to register of Protected Designations of Origin
02.04.2024  
10:15 FAO and chef Fatmata Binta announce new project to empower women fonio producers in Ghana
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

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