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BASF confirms third-quarter net loss, sequential improvement in operating profit

October 28/2020

MOSCOW (MRC) -- BASF has announced third-quarter results in line with the preliminary figures it published on 9 October, said the company.

The company swung to a net loss of EUR2.1 billion (USD2.5 billion), compared with a net profit of EUR911 million in the prior-year quarter, on impairments totaling EUR2.8 billion due to the impacts of COVID-19 and restructuring, as previously reported. BASF group sales of EUR13.8 billion were down 5% year on year (YOY).

BASF also confirmed that third-quarter EBIT before special items (operating profit) rose sharply compared with the previous quarter, to 581 million, up by EUR355 million and beating analysts consensus estimate by 47%. On a YOY basis, EBIT before special items dropped 45%, due mainly to a much lower contribution from the chemicals segment.

The big sequential improvement in EBIT before special items was mainly driven by good business development in September, says Martin Brudermuller, chairman of BASF. EBIT including special items was minus EUR2.6 billion, swinging from EUR1.3 billion in the year-earlier quarter due to the impairments. EBITDA before special items decreased by 22% YOY to EUR1.5 billion and EBITDA dropped 54% to EUR1 billion.

The YOY decline in sales was mainly driven by negative currency effects in all segments, but especially in the agricultural solutions and surface technologies segments. Revenue fell 27% YOY in the chemicals segment due mainly to an unplanned outage at the steam cracker at Port Arthur, Texas. Higher price levels overall, primarily due to higher precious metal prices in the surface technologies segmentwhere sales increased 25% YOYhad an offsetting effect. Portfolio effects, especially in the materials segment from the acquisition of Solvays nylon business, also had a positive impact on sales. Sales of the materials business decreased 8% YOY and revenue from industrial solutions dropped 13%. BASFs third-quarter group sales increased sequentially and were EUR1.1 billion higher than in the previous quarter.

EBIT before special items dropped in the nutrition and care segment, and materials and agricultural solutions segments. The industrial solutions and surface technologies segments posted slight decreases. Sales at BASF companies based in Europe declined by 12% YOY, primarily due to lower volumes, especially in the materials and Other segments. Compared with the prior-year quarter, sales in North America declined by 6%. This was mainly driven by lower volumes, especially in chemicals due to the cracker outage at Port Arthur. BASFs sales in APAC improved 10% YOY. This was largely attributable to higher volumes in almost all segments. In the region South America, Africa, Middle East, sales were down 9% YOY on negative currency effects in all segments, especially agricultural solutions.

BASF notes that in the third quarter, the global industrial economy recovered from the sharp downturn in the second quarter. However, global production levels were still about 3% lower than in the prior-year quarter. The automotive industry, which was particularly strongly affected by production closures in the second quarter, was still down about 2% from the prior-year period. Demand for durable consumer goods picked up with demand for consumables such as food and care products, some of which saw stronger demand as a result of the pandemic, gradually returning to normal. However, following the dynamic recovery effects in the third quarter, momentum is expected to slow in the remaining months of the year, BASF says.

BASF expects in full-year 2020 a 5% decline in worldwide GDP and in industrial production, as well as a 2.5% decrease in worldwide chemical production. BASFs forecast assumes that severe restrictions on economic activity to contain the pandemic, such as lockdowns, are not reintroduced.

The company anticipates another sequential improvement in its EBIT before special items in the fourth quarter. BASF, meanwhile, has reconfirmed its full-year forecast, made on 9 October, of a slight decline in sales to EUR57-58 billion, mainly due to weaker demand as a consequence of COVID-19. BASF also anticipates a big decrease in 2020 EBIT before special items to EUR3.0-3.3 billion. As well as weaker demand, the company expects pressure on margins to continue, especially for basic chemicals, which will be partially offset by fixed-cost savings.

As MRC informed earlier, ASF is planning to restart its 300,000-metric ton/year toluene diisocyanate (TDI) plant in Ludwigshafen, Germany, by the end of October. The company declared force majeure on 31 August after experiencing technical problems. 

We remind that Russia's output of chemical products rose in September 2020 by 6.7% year on year. At the same time, production of basic chemicals increased by 6.1% year on year in the first nine months of 2020, according to Rosstat's data. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the January-September output. Last month's production of primary polymers decreased to 852,000 tonnes from 888,000 tonnes in August due to shutdowns in Tomsk, Ufa and Kazan. Overall output of polymers in primary form totalled 7,480,000 tonnes over the stated period, up by 16.4%  year on year.

BASF-YPC Company Limited (BASF-YPC) is a 50-50 joint venture between BASF and Sinopec, founded in 2000, with a total investment of approximately USD5.5 billion. The integrated petrochemical site produces about three million tons of high-quality chemicals and polymers for the Chinese market annually. The products serve the rapid-growing demand in multiple industries, including agriculture, construction, electronics, pharmaceutical, hygiene, automotive and chemical manufacturing. All BASF-YPC plants are interconnected in order to use products, by-products and energy in the most efficient way, to save cost and to minimize the environmental impact. BASF-YPC posted sales of approximately CNY 19.6 billion in 2019 and employed 1,942 people as of the end of the year.
Author:Anna Larionova
Tags:petroleum products, neftegaz, petrochemistry, BASF.
Category:General News
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