BASF's Operating Profit Down 31.6% Last Year... "Will Be Affected by COVID-19 Throughout This Year"

[Asia Economy Reporter Yoonju Hwang] Global chemical company BASF announced on the 2nd that its operating profit in 2019 recorded 4.1 billion euros, a 31.6% decrease compared to the previous year. During the same period, sales amounted to 59.3 billion euros, down 2%.

BASF explained, "In 2019, sales decreased due to a decline in sales volume and price drops, and operating profit before special items also declined due to the low profitability contribution of the Chemicals and Raw Materials segments."

BASF internally evaluated that it performed well under difficult management conditions. The trade war between the United States and China negatively affected the global economy, including slowed growth in major markets, and the uncertainty caused by Brexit further worsened the situation. As a result, industrial and chemical production growth was weaker than expected, and demand from key customer industries, including the automotive sector, also significantly decreased.

BASF increased profits in all downstream segments; however, operating profit before special items in the Chemicals and Raw Materials segments decreased by 2.2 billion euros to 1.8 billion euros. Factors such as a sharp drop in isocyanate prices, cracker margin declines, scheduled cracker maintenance, and overall demand slowdown negatively impacted results.

On the other hand, BASF recorded significant growth in downstream segments compared to the previous year. Operating profit before special items increased in the Industrial Solutions and Surface Technologies segments due to fixed cost reductions, currency strengthening, and margin improvements. The Nutrition & Care segment also saw a slight increase in operating profit before special items due to improved performance in the Care Chemicals division. Operating profit before special items in the Agricultural Solutions segment also increased considerably.

Chairman Brudermueller stated, "The global economy has already experienced high uncertainty within just two months this year," adding, "At the beginning of this year, the coronavirus emerged as a new factor particularly hindering growth in China, and measures to prevent the virus spread have already caused demand decreases and production disruptions in many industries."

BASF expects the coronavirus to have a significant negative impact globally in the first half of 2020. This forecast does not consider the effects of the worldwide virus spread after the first half. Accordingly, Chairman Brudermueller said, "I do not believe the impact of the coronavirus will be fully offset within this year."

BASF anticipates that the global economy will grow at 2% in 2020, lower than the 2.6% growth rate in 2019. It also expects global chemical production to increase by a considerably low 1.2% compared to 1.8% in 2019, marking the lowest growth rate since the 2008-2009 financial crisis. BASF forecasts the average oil price (Brent crude) at 60 dollars per barrel and the average euro-dollar exchange rate at 1.15 dollars per euro.

Meanwhile, BASF Group's EBITDA before special items in 2019 was 8.2 billion euros, down 11% from 2018, and EBITDA was 8.0 billion euros, lower than 9.0 billion euros in 2018. Net profit reached 8.4 billion euros, higher than 4.7 billion euros the previous year, including approximately 5.7 billion euros of book gains from the separation of Wintershall due to the merger with DEA.

This content was produced with the assistance of AI translation services.