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Profit slump at chemical company: Trade conflicts burden BASF

2019-10-24T06:28:46.836Z


The chemical company BASF is already clearly feeling the effects of Zollstreit, Brexit and the economic crisis. However, it was also better than expected in some segments.



BASF is struggling with the weak economy. Lower prices and subdued demand are also weighing on the business. In the third quarter, the adjusted operating profit (EBIT) therefore fell compared to the same period last year by almost a quarter to 1.1 billion euros, as the chemical company announced. After taxes and minority interests remained a profit of 911 million euros.

Sales fell, according to information, by two percent to 15.2 billion euros. "Especially the trade conflict between the US and China is putting a strain on our business," said CEO Martin Brudermüller. "Add to that the uncertainties associated with Brexit." Back in September, he said it was becoming increasingly difficult to predict how and when customers would place orders.

The company had already cut its annual forecast due to the crisis in the auto industry and the customs dispute between the US and China in the summer - and announced to cancel 6000 jobs. This week it became known that the board should also be downsized. From 1 January 2020, the panel will no longer be seven but six members. CEO Brudermüller called on the politicians in view of this situation already to extensive reforms and warned about unemployment through climate change.

Group restructuring continues

However, in the third quarter, BASF still exceeded the expectations of analysts who had anticipated even worse results in terms of sales and earnings. Because in individual sectors, BASF was doing better. Brudermüller said, "In our Downstream segments, we have been successful despite a difficult market environment, posting a significant improvement over the same quarter last year."

The BASF CEO has now confirmed the then lowered forecast for the current financial year. Accordingly, Brudermüller continues to expect a decline in adjusted operating profit of up to 30 percent. Sales are expected to fall slightly.

The BASF boss, who has been in office for more than a year, is rebuilding the group. In 2018, Brudermüller strengthened the agricultural chemicals business in particular by acquiring plant protection products and various seed varieties from its rival Bayer for several billion euros, which it had to hand over in the course of the Monsanto takeover. Sales in this area should rise sharply.

At the same time, BASF is separating itself from business units. Their oil and gas subsidiary Wintershall was merged with its competitor Dea. In addition, BASF is selling its pigment business for around one billion euros to the Japanese fine chemicals manufacturer Dic. BASF also wants to part with its construction chemicals business.

BASF employs more than 120,000 people worldwide. According to the company, around 50,000 of these have so far been attributable to the Group's German locations. For the main plant in Ludwigshafen alone - with about ten square kilometers of the largest contiguous chemical plant in the world - BASF indicates the number of employees with 39,000.

Source: spiegel

All business articles on 2019-10-24

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