ADVERTISEMENT
2 /3 FREE ARTICLES LEFT THIS MONTH Remaining
Chemistry matters. Join us to get the news you need.

If you have an ACS member number, please enter it here so we can link this account to your membership. (optional)

ACS values your privacy. By submitting your information, you are gaining access to C&EN and subscribing to our weekly newsletter. We use the information you provide to make your reading experience better, and we will never sell your data to third party members.

ENJOY UNLIMITED ACCES TO C&EN

Finance

BASF and Dow see early coronavirus impacts in first-quarter earnings

Manufacturing shutdowns and oil prices were a drag on results

by Melody M. Bomgardner
April 30, 2020 | APPEARED IN VOLUME 98, ISSUE 17

09817-buscon2-coatings.jpg
Credit: BASF
Two workers inspect an automotive coating at a BASF facility in Southfield, Michigan.

First-quarter earnings at chemical giants BASF and Dow show the early impact of the novel coronavirus as it slowed sales to industry—first in China and then in Europe and the US. Business units such as polymers and coatings that serve auto manufacturing were hardest hit as car plants temporarily shut down. What’s more, the cratering cost of oil weighed on prices the firms could command for petrochemicals.

The global pandemic had an uneven effect. For example, sales of ingredients for pharmaceuticals, detergents, food, and food packaging were strong as consumers boosted spending on day-to-day consumables.

“The first quarter of 2020 was not a normal quarter,” said BASF chairman Martin Brudermüller in an earnings presentation. “The same will be true for the second quarter and likely for the entire year.”

BASF reported earnings of $1.3 billion, an 18% decline compared with the year-earlier quarter, though overall sales rose slightly. Low profit margins took a big bite out of earnings from ethylene and propylene derivatives, isocyanates, nylon precursors, and other monomers. BASF saw auto demand for coatings fall 11%.

Meanwhile, earnings from BASF’s nutrition and care ingredients grew 14%. Sales of seeds and agricultural chemicals were higher, thanks to early demand from farmers.

At Dow, earnings were down 40%, to $439 million, versus pro forma results from the first quarter of 2019. Sales dropped 11% because of low crude prices, which hurt revenues from hydrocarbons, polyurethanes, and construction chemicals. Dow also saw a decline in demand for materials used in furniture, autos, and appliances, particularly in China.

Dow says it will trim $750 million from capital spending this year and cut operating expenses by $350 million. At BASF, members of the supervisory board and board of directors decided to cut their fixed compensation 20%.

Neither Dow nor BASF offered a 2020 forecast, but Dow CEO Jim Fitterling sounded optimistic in his note to shareholders. “Assuming a gradual and sustainable return of global economic activity and reopening of economies in May and June, we expect a recovery will begin to take hold as the year progresses,” he wrote.

Advertisement
X

Article:

This article has been sent to the following recipient:

Leave A Comment

*Required to comment