Germany’s BASF has revised its forecast for 2018 profits downwards. It now expects earnings before interest and tax before special items (EBIT) to fall by 15–20% compared to last year’s €7.6 billion. This is a steep decline from its previous forecast of a 10% fall for 2019.
The chemicals giant says this predicted decline is mainly due to its chemical segment, alongside low water levels on the Rhine following a summer drought and low automotive demand, particularly in China where ongoing trade disputes with the US have had a knock-on effect for many companies across the world.
BASF’s business with the Chinese automotive industry has continued to decline since the third quarter. A spokesperson stated: “The trade conflict between the United States and China contributed to this slowdown.”
Bernhard Kunz BASF SE
Citral-Anlage der BASF in Ludwigshafen / Citral plant at BASF's
Betriebsmeister Volker Dinges (links) und Chemikant Christian Lauer (rechts) überprüfen eine Destillationskolonne der Freianlage. Die Citral-Anlage am Verbundstandort Ludwigshafen liefert den Schlüsselbaustein der BASF-Feinchemie: Citral ist der Ausgangsstoff für die Vitamine A und E, Carotinoide sowie verschiedene Aromachemikalien. Die BASF ist der weltweit größte Hersteller von Citral, das sind pro Jahr rund 40.000 Tonnen. Abdruck honorarfrei. Copyright by BASF. Plant supervisor Volker Dinges (left) and chemical technician Christian Lauer (right) inspect a distillation column of the outdoor plant. The citral plant at BASF's Verbund site in Ludwigshafen provides the key building block for BASF's fine chemicals: Citral is a starting material for vitamins A and E as well as for carotenoids and a variety of aroma chemicals. BASF is the world’s biggest manufacturer of Citral, with around 40,000 metric tons per year. Print free of charge. Copyright by BASF.
The profit warning comes two weeks after CEO Martin Brudermuller announced a cost-cutting drive to boost annual earnings by €2 billion by 2021 to counter slower profit growth.
Under the new programme, BASF is aiming at 3–5% annual growth in earnings before interest, taxes, depreciation and amortisation (EBITDA) after averaging 8% a year since 2012.
BASF shares have declined by 34% in the year to date, cutting the company’s market value to €56 billion.