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BASF' financial figures in 2018.
BASF' financial figures in 2018.
Photo: 12

BASF generated sales of €62.7 billion last year. This represented an increase of 2% compared with the previous year. Income from operations (EBIT) before special items declined to €6.4 billion, compared with €7.6 billion in the previous year.

This was mainly attributable to the Chemicals segment, which accounted for around two-thirds of the total decline in earnings. Isocyanate margins fell sharply in the second half of the year. Furthermore, cracker margins were lower than expected in all regions in 2018.

Overall, 2018 was a year characterized by difficult global economic and geopolitical developments and trade conflicts. In the second half of the year, BASF felt an economic slowdown in key markets, especially in the automotive industry, BASF’s largest customer sector. In particular, demand from Chinese customers declined significantly. The trade conflict between the United States and China contributed to this.

We are tackling these challenges. With our new corporate strategy, we will use 2019 as a transitional year to emerge even stronger. This year, we are adapting our structures and processes, and focusing our organization clearly on the needs of our customers,” said BASF’s Chairman of the Board of Executive Directors, Dr. Martin Brudermüller, who presented the 2018 financial figures together with Chief Financial Officer Dr. Hans-Ulrich Engel.

Volumes rose slightly compared with the previous year: Higher volumes in the Functional Materials & Solutions and Agricultural Solutions segments were partially offset by lower volumes in the Performance Products and Chemicals segments.

Earnings development in Q4 2018

BASF Group’s sales rose by 2% in the fourth quarter of 2018 to €15.6 billion. Supported by the segments Performance Products, Functional Materials & Solutions and Agricultural Solutions, prices could be raised by 2%. Volumes declined by 3%. This was primarily attributable to the prolonged low water levels on the Rhine River.

EBIT before special items in the fourth quarter was €630 million, down 59% on the prior-year figure. This decline was due to significantly lower earnings in the Chemicals and Agricultural Solutions segments. In the Chemicals segment, the main reason for this was lower margins in the isocyanate and cracker business.

Investments in organic growth in Asia

China is now already the key market in Asia and worldwide – both for BASF as well as for the entire chemical industry. At the end of October 2018, BASF signed an agreement with SINOPEC to expand their partnership at the Verbund site in Nanjing, China. The joint venture BASF-YPC will invest in a 50% stake to build another steam cracker with a capacity of 1 million metric tons of ethylene per year.

Furthermore, a framework agreement signed in January 2019 with the government of Guangdong Province in southern China sets out further details of BASF’s plan to establish a new Verbund site in the city of Zhanjiang.

India is another market where BASF wants to invest. The company recently signed a memorandum of understanding with Adani to investigate a major joint investment in the acrylics value chain. This would be BASF’s largest investment in India to date and its first CO2-neutral production facility.

Outlook for the year 2019

In the current year, BASF expected the global economy to grow by 2.8%, considerably slower than in 2018 (3.2%).

In the European Union, the company anticipated weaker growth in both domestic demand and export demand from third countries. On the other hand, BASF presumed the United States will deliver solid growth, although the stimulus effect of the tax reform should be less pronounced than in 2018. Growth in China will likely continue to cool but remain high compared with the advanced economies. By contrast, the economic recovery in Brazil is expected to hold up.

The outlook is based on the following additional economic assumptions for the year 2019:

  • Growth in global chemical production of 2.7% in 2019 (2018: +2.7%)
  • Average oil price of $70 for a barrel of Brent blend crude
  •  An average exchange rate of $1.15 per euro 

We also expect growth in our customer industries to continue. For the automotive industry, we anticipate a slight recovery after lower production in the previous year,” said Brudermüller. BASF’s outlook also assumed that the trade conflicts between the United States and its trading partners will ease over the course of the year, and that Brexit will occur without wider economic repercussions.

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