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BASF plant in Schwarzheide, Brandenburg: A number of chemical companies expect lower profits
Photo: Patrick Pleul / dpa
Weak demand thwarts BASF's full-year targets. For 2023, the world's largest chemical company expects sales of only between 73 and 76 billion euros, down from 87.3 billion euros in the previous year. Previously, the forecast was significantly higher at 84 to 87 billion euros.
Management now expects operating profit (adjusted EBIT) to be between EUR 4.0 billion and EUR 4.4 billion, compared to a decline of EUR 6.9 billion to EUR 4.8 billion from just under EUR 5.4 billion in the previous year to between EUR 1.7 billion and EUR <>.<> billion. The share was under pressure in after-hours trading at a discount of <>.<> percent.
BASF is not alone in the industry in Germany with the more pessimistic outlook. On Monday, the Essen-based chemical company Evonik had already gone ad hoc with a gloomy picture of the situation, while the Cologne-based company Lanxess had already prepared its shareholders for worse figures in mid-June.
The announcements of the companies reveal something about the situation of the entire economy in Germany: The demand for chemicals as a raw material in many industries is currently weak, which also drags down the sales prices and profits of manufacturers. Many industries have recently reduced stocks in the warehouses, which is also an expression of pessimism. And BASF expects only a "tentative recovery", as the company announces.
According to preliminary calculations, BASF's sales in the second quarter fell by a quarter year-on-year to €17.3 billion, driven by significantly lower prices and volumes overall. Negative currency effects also slowed down. Analysts had expected an average of two billion euros more. Meanwhile, earnings before interest, taxes (EBIT) and special items fell by more than half to 1.007 billion euros, in line with expectations. Profits slumped to 499 million euros. Experts had expected 729 million euros. A year earlier, BASF had earned a good two billion.
At the beginning of the week, Evonik CEO Christian Kullmann described the situation in the industry with the following words: "The global economy is paralyzing, and we are feeling the effects of it, too." According to Kullmann, Evonik has not experienced such weak sales for a long time, "perhaps never before over such a long period of time."
The chemical industry needs a lot of natural gas – as a raw material and as an energy source for its plants and power plants. For decades, the industry in Germany had comparatively low and reasonably stable gas prices. The site has lost this advantage with the Russian aggression in Ukraine and the loss of gas supplies from Russia. In addition, electricity is comparatively expensive in Germany.
bem/kko/dpa/Reuters