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

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 segment—where sales increased 25% YOY—had an offsetting effect. Portfolio effects, especially in the materials segment from the acquisition of Solvay’s nylon business, also had a positive impact on sales. Sales of the materials business decreased 8% YOY and revenue from industrial solutions dropped 13%. BASF’s 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. BASF’s 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. BASF’s 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.
MRC

MOSCOW (MRC) -- Azelis is delighted to announce that it has signed an agreement to acquire 100% of the shares of Ixom’s Bronson and Jacobs Hong Kong Ltd business and its fully owned subsidiary in Shanghai (Bronson and Jacobs China), said the company.

Bronson and Jacobs China, specialized in the distribution of personal care ingredients and predominantly for skin care, represents many global principals, and has offices in Hong Kong, Shanghai and Guangzhou. The office in Guangzhou houses a personal care lab.

The acquisition of Bronson and Jacobs China, following on the acquisition of CosBond in April 2020, will additionally strengthen Azelis’ footprint in the Chinese personal care market. It will also enable Azelis to better serve several key multinational customers in China. Growth in China, the second largest economy worldwide, is a prime strategic objective for Azelis. The transaction, consistent with Azelis' corporate strategy of complementing organic growth with strategic acquisitions, is expected to close within two months.

The acquisition of Bronson and Jacobs China illustrates the support provided by EQT since the initial acquisition of Azelis. EQT is confident that the expanded range of services and global reach provided by this acquisition will continue to bring benefits to customers and principals of the combined group.

As MRC informed earlier, Azelis has opened a new application and training center in Istanbul, Turkey. This center will service the Turkish food, personal care and pharma markets and will offer product advice, formulation development and technical research. Next to that, it will host customer meetings, interactive formulation workshops, supplier meetings and internal technical trainings.

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.
MRC

MOSCOW (MRC) -- Reliance Industries (RIL) is on track to restart its polypropylene (PP) unit in Jamnagar, India as the company is completing the 20 days maintenance works, reported CommoPlast.

The unit was taken offline on 15 October and would come back online on 5 November 2020.

The plant has an annual capacity of 480,000 tons/year.

As MRC informed earlier, in September 2020, RIL released a detailed plan to carve out its oil-to-chemicals business into a separate entity for a potential stake sale. As per the scheme, RIL’s oil-to-chemicals (O2C) assets, including its refining, petrochemicals, fuel retail (majority interest only) and bulk wholesale marketing businesses, along with its assets and liabilities, will be transferred to a new unit. The new unit will include the refining and petrochemical plants and manufacturing assets at RIL’s Jamnagar, Dahej, Hazira, Nagothane, Vadodara, Patalganga, Silvassa, Barabanki and Hosiarpur locations.

It will also include all assets relating to RIL’s ongoing refinery and petrochemical projects that are being commissioned or near completion, the company said. RIL had officially announced its proposal to transfer its oil-to-chemicals (O2C) business to a separate entity in April.

According to MRC's ScanPlast report, PP shipments to the Russian market reached 767,2900 tonnes in the eight months of 2020 (calculated using the formula - production minus exports plus imports - and not counting producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

Reliance Industries is one of the world's largest producers of polymers. Thus, the company produces among others polypropylene, polyethylene and polyvinyl chloride.
MRC

MOSCOW (MRC) -- Crude oil futures were higher day on day in European morning trading Oct. 27, but slightly down from levels in earlier Asian trading, with the market reflecting on lost production of both crude and products in the Gulf of Mexico as a result of Hurricane Zeta, reported S&P Global.

At 1214 GMT, the ICE December Brent crude futures was up 20 cents/b from the Oct. 26 settle at USD40.65/b while the NYMEX December light sweet crude contract was 25 cents/b higher at USD38.81/b.

The 27th named storm in this year's Atlantic hurricane season is expected to make landfall in the US on the morning of Oct. 28, the country's National Hurricane Center has said. BP, Equinor and Chevron were among those who'd suspended production at offshore oilfields in the gulf, while Shell said it hadn't done so. "We are likely to see further production shut in the coming days," ING wrote in a note.

The Bureau of Safety and Environmental Enforcement has said almost 294,000 b/d of production is shut in, which represents 16% of total production in the Gulf of Mexico. Zeta is expected to strengthen into a hurricane later on Oct. 26 and make an initial landfall near Mexico's Yucatan Peninsula before entering the central Gulf and making a second landfall as early as Oct. 28 near southeastern Louisiana, according to the hurricane center. The subsequent risk of refinery closures means that many market participants are prepared for this session's price rise to be reversed.

"The situation on the oil market remains confusing and ominous," wrote Commerzbank in a research note, drawing attention to possible demand destruction from "refinery closures and transport restrictions" that could be the next result of Hurricane Zeta.

Moreover, the growth of COVID-19 cases in Europe and the US means that traders are circumspect about any rise in crude prices, especially given the previously stated intention of OPEC+ to relax output cuts from January.

"If there is little improvement in the demand picture, there will likely be growing pressure on OPEC+ to rollover current cuts into next year," wrote ING.

With nine days remaining until the US presidential election, commodity, bond and equity markets are all examining possible policy changes in the world's biggest economy.

Commerzbank said a victory for Joe Biden could be both negative and positive for oil prices in the longer term. Among bearish signals for oil, Commerzbank named the Democrat candidate's commitment to alternative energy, as well his position toward Iran, which could pave the way for the major producer to be reintegrated into the oil market. However, decisive victory for the Democrats could also provide a boost to prices if it accelerated fiscal stimulus measures or if Biden restricts US shale oil.

As MRC reported earlier, Chevron Phillips Chemical, part of Chevron Corporation, still has not lifted force majeure on its polyethylene (PE) products after assessing the impact of Hurricane Laura to its Gulf Coast PE operations. The force majeure circumstances were declared on 1 September, 2020. CP Chem operates a 420,000 mt/year high-density polyethylene (HDPE) plant in Orange, Texas, and an 855,000 mt/year cracker in Port Arthur. The company plans to minimize the impact of the event and return to full PE deliveries as soon as possible.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,496,500 tonnes in the first eight months of 2020, up by 5% year on year. Shipments of all ethylene polymers increased, except for linear low desnity polyethylene (LLDPE). At the same time, PP shipments to the Russian market reached 767,2900 tonnes in the eight months of 2020 (calculated using the formula - production minus exports plus imports - and not counting producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.
MRC

MOSCOW (MRC) -- PTT Global Chemical (PTTGC) might start up the newly constructed cracker in Map Ta Phut, Thailand this December, reported CommoPlast with reference to market sources.

The company kickstarted the project in early 2018 as part of PTTGC’s USD4.5 billion projects to “retrofit” its Map Ta Phut site.

The new cracker operates on flexible feeds, primarily to utilize the surplus naphtha from its refinery. The unit has an annual capacity of 500,000 tons/year of ethylene and 261,000 tons/year of propylene.

As MRC wrote previously, PTTGC fully restarted its No. 2 cracker in Map Ta Phut by end-February, 2020, after a planned turnaround. The cracker was shut for maintenance on January 20, 2020. Located at Map Ta Phut, Thailand, the No. 2 cracker has an ethylene production capacity of 400,000 mt/year.

The company also operates No. 1 cracker at the same site with a capacity of 515,000 tonnes of ethylene and 310,000 tonnes of propylene per year, which was also shut on 23 January, 2020, for a 40-day turnaround.

Ethylene and propylene are feedstocks for producing PE and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,496,500 tonnes in the first eight months of 2020, up by 5% year on year. Shipments of all ethylene polymers increased, except for linear low desnity polyethylene (LLDPE). At the same time, PP shipments to the Russian market reached 767,2900 tonnes in the eight months of 2020 (calculated using the formula - production minus exports plus imports - and not counting producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

PTT Global Chemical is a leading player in the petrochemical industry and owns several petrochemical facilities with a combined capacity of 8.45 million tonnes a year.
MRC