Outlook weakens for European chemical industry

Demand for chemicals dropped in the second quarter of the year, and the problem is showing no signs of abating, some European companies say.

BASF, in particular, has felt the effects of the weak market. According to the firm’s preliminary financial results, its sales for the second quarter will be down 25% compared with the year-ago period to $18.9 billion. The German giant expects its corresponding pretax profits before special items to be down 57% to $1.1 billion. The firm has substantially downgraded its expected sales and pretax profits for the full year.

Germany’s Evonik Industries has also revised its outlook for 2023 downward and “no longer assumes any recovery in the second half of the year,” it states in a press release. In its preliminary financial results for the second quarter, Evonik says its pretax profit is down about 40% from the year-ago period. Sales are down 16% to about $4.4 billion. The company plans to cut costs and reduce capital expenditure.

Evonik and its peers face common headwinds across the chemical sector, states Sebastian Bray, a chemical stock analyst at Berenberg Bank, in a financial note.

Clariant is another firm to have downgraded its expectations for 2023. “The uncertainties and risks related to the economic environment, including the pace of a recovery in China, which we had indicated at the start of this year have unfortunately materialized and are weighing on the industry as a whole,” Clariant CEO Conrad Keijzer says in a press release. On a positive note, the Swiss firm has a “strong order book” for its catalyst business.

Reporting preliminary financial results for the second quarter, Clariant expects pretax profits to be down by about 25% to between $139 million and $148 million. Sales will be down about 17% to $970 million.

Shell also reported preliminary results for the second quarter. The British firm expects to record a financial loss for its chemical business despite improved profit margins.