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Finance

BASF releases promising third-quarter results

The German firm’s preliminary earnings point to improvement by the end of the year

by Alexander H. Tullo
October 14, 2020 | APPEARED IN VOLUME 98, ISSUE 40

 

09840-buscon2-basf.jpg
Credit: BASF
A BASF distribution center in Ludwigshaven, Germany

BASF has released its preliminary earnings for the third quarter, and if results from the world’s largest chemical maker are any indication, the chemical industry is starting to recover from the COVID-19-depressed lows of the second quarter.

With economies in the US and Europe shuttered by COVID-19, the second quarter was disastrous for chemical makers. Most major firms surveyed by C&EN posted double-digit declines in sales and earnings.

BASF’s sales for the third quarter were $16.6 billion, a 5% decline versus the year-ago quarter but a 9% increase over the second quarter.

Similarly, BASF’s earnings before extraordinary items were $680 million during the quarter, a 45% decrease versus the year-ago period but an increase of 157% from the second quarter. The figure doesn’t include asset impairments of about $3.3 billion due to COVID-related shutdowns and restructuring.

For the full year, BASF expects to log sales of up to $68 billion, a drop from the $69 billion it posted in 2019. It expects before-tax earnings of $3.9 billion, down sharply from the $5.4 billion it racked up in 2019. “As well as weaker demand, the company expects pressure on margins to continue, especially for basic chemicals, which will be partly offset by fixed-cost savings,” BASF says.

BASF isn’t the only industry watcher expecting better times to come. In a report to clients, the investment bank Morgan Stanley says it expects a “V-shaped” recovery in chemicals for the remainder of this year and into 2021. Asian firms will lead the way, the report says, largely because lower oil prices will help them compete against their US counterparts.

“We believe the whole industry will hit a trough in 2020 with a visible recovery in 2021 given both the demand and supply outlook is improving,” the report says.

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